Financial Experts Express Concern Over SEC's Impact on Crypto ETFs
Summary:
Prominent individuals in finance and crypto, including U.S. financial lawyer Scott Johnsson and venture capitalist Nic Carter, express concerns over the SEC's possible influence on crypto ETFs, notably the potential consequences of rules related to in-kind creation and redemption for digital assets. The anxieties come amid a surge in market confidence following the approval of Bitcoin Spot ETF. The experts warn the SEC's cautious approach could potentially introduce a less secure product, resulting in reduced investor protection and potentially higher costs. Cryptocurrency exchange BitMEX also raised concerns about SEC regulations potentially affecting the efficiency of ETFs. Several significant entities are awaiting the SEC's decision on their Bitcoin Spot ETF applications.
Prominent individuals across both the finance and cryptocurrency sectors have expressed their worries through X (Twitter's previous name) about the potential impact that regulations from the U.S. Securities and Exchange Commission (SEC) might have on cryptocurrency exchange-traded funds (ETFs). Among those voicing their concerns are U.S. financial attorney, Scott Johnsson, venture capitalist Nic Carter, and cryptocurrency exchange BitMEX. They particularly pointed out the possible implications of the SEC's rules mandated for the creation and redemption of digital assets.
The recent approval of the Bitcoin Spot ETF has induced market optimism and heightened expectations amongst global investors regarding a significant inflow into the crypto market post-approval. Many experts believe that the Bitcoin Spot ETF could get a green light from the SEC as soon as January.
The operating model for ETFs is designed in such a way that if the ETF trades at a premium, which often happens due to an imbalance between buyers and sellers, the authorized dealers or participants are encouraged to buy the underlying assets and transfer them to the provider in return for new ETF units.
However, fears have begun to emerge from knowledgeable sources like Scott Johnsson and Nic Carter about the imminent Bitcoin Spot ETF, highlighting the SEC’s conservative approach. Johnsson spotlighted an issue, underscoring the SEC’s reluctance to greenlight amendments that would authorize the in-kind creation or redemption of digital assets. Johnsson mentioned the SEC's concerns about compliance, resulting in decreased investor protection despite its obligations. Johnsson warns that this style of regulation paves the way for a new, potentially less secure product, exposing investors to additional risks.
Furthermore, Nic Carter, a leading figure in the cryptocurrency world and venture capitalist, reiterated similar sentiments. Carter raised the point that, realistically speaking, crypto ETFs run the risk of becoming less efficient due to increased transaction costs for creating and redeeming shares because of the SEC's stance. While it remains uncertain if this could cause tracking errors or elevate expense ratios, the increased costs that may arise cannot be denied.
Concerns about basic ETF operations under the influence of SEC were aired by BitMEX, the cryptocurrency exchange co-founded by Arthur Hayes. BitMEX underlined the standard mechanism in which authorized participants (APs) play a critical role in ensuring ETF efficiency via in-kind creation and redemption.
However, BitMEX warned that as the SEC gravitates more towards cash transactions exclusively, this could result in losing primary benefits, limiting competition, and reducing the effectiveness of ETFs.
BlackRock, Grayscale, Bitwise, WisdomTree, Invesco, Galaxy, Fidelity, ARK Invest, Valkyrie, Franklin, Hashdex, Global X ETFs, and Pando Asset, are all waiting for the SEC's decision regarding their Bitcoin Spot ETF applications.
Published At
12/27/2023 12:55:19 PM
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