Bitcoin ETF Issuers May Need to Disclose On-Chain Addresses Amid Market Competition
Summary:
Potential Bitcoin (BTC) exchange-traded funds (ETF) issuers might need to reveal their on-chain addresses to stay competitive, according to industry activist, Samson Mow. Yet, none of the present 14 applicants are providing on-chain proofs. Despite stringent regulation, issuers may violate rules, creating potentially "unbacked" Bitcoin ETFs. Transparency is viewed as a crucial factor in the Bitcoin ETF market race. U.S. security regulators are expected to grant the first Bitcoin ETFs in early January. However, ETF analysts warn of a potentially harsh fee competition among issuers.
As per an industry advocate, Bitcoin (BTC) exchange-traded funds (ETF) issuers might need to reveal the on-chain addresses of their underlying BTCs to maintain competitiveness with other issuers. Samson Mow, CEO of Jan3, believes the disclosure of verifiable on-chain evidence of Bitcoin reserves would be the optimal way for spot Bitcoin ETF issuers to confirm their holdings. Unfortunately, none of the current 14 applicants are delivering on-chain proofs, as Mow declared in a Cointelegraph discussion on December 28.
There has been speculation among crypto enthusiasts regarding the true holdings of a spot Bitcoin ETF, with some senior executives implying that a spot Bitcoin ETF could potentially lead to the emergence of “millions of unbacked BTC.” In response, industry analysts like Eric Balchunas from Bloomberg ETF advised that physically holding Bitcoin would be in the “best interest” of ETF issuers to prevent reputational damage and loss of trust.
Leah Wald, co-founder and CEO of Valkyrie, stated that to authenticate if a spot BTC ETF issuer truly possesses Bitcoin, investors should inspect regularly posted records from the ETF provider. Wald equated the procedure to authenticating an equity ETF's claims of investing in listed securities through checking fund holdings. Many regulatory bodies, she said, would scrutinize the underlying asset holdings.
The Valkyrie CEO highlighted that tech-savvy Bitcoin enthusiasts could also study the fund flows on and off-chain. Skeptics argue that the authenticity of a spot Bitcoin ETF's assets cannot be verified until on-chain evidence is provided by the issuer. Firm like Grayscale Investments, however, have previously declined to share such data, citing security reasons.
Mow conjectures that although unlikely due to stringent regulations, the existence of an "unbacked" Bitcoin ETF could be a possibility in case of violation of rules by the issuer. Nevertheless, he forecasts that transparency will be a crucial competitive driver in the race for leading the spot Bitcoin ETF market.
It is widely anticipated that the maiden Bitcoin ETFs will be authorized by U.S. security regulators early this January. Experts like Nate Geraci warn that spot Bitcoin ETF issuers might face stiff fee competition, with companies like Invesco and Galaxy planning to waive fees for the first six months and $5 billion in assets.
Balchunas and ETF analyst James Seyffart anticipate a 90% chance of the U.S. Securities and Exchange Commission approving a spot Bitcoin ETF by January 10. They foresee potential rejection if regulators require additional time, which could result in what they term the “rug pull of a decade.”
Published At
1/3/2024 1:00:47 PM
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