Key SEC Deadline Looms for U.S. Bitcoin ETF Applicants: A Forerunner to January Approvals?
Summary:
Today is a significant deadline for spot Bitcoin (BTC) exchange-traded fund (ETF) applicants in the U.S. who are required to submit final S-1 amendments. The U.S. Securities and Exchange Commission (SEC) has requested applicants to finalize their preferred cash-create redemption model and sign an agreement with an authorized participant (AP). The regulator's preference for a cash model aims to limit intermediaries' access to Bitcoin in the redemption and offering process. The cryptocurrency community is eager to find out which applicants might first receive approval for a spot BTC ETF, expected in early January.
The cryptocurrency realm is on tenterhooks, anticipating the possible approval of a Bitcoin (BTC) spot exchange-traded fund (ETF) in the U.S., slated for January. Today is a significant deadline regarding this matter. Recently, the U.S. Securities and Exchange Commission (SEC) informed that applicants for the spot Bitcoin ETF should submit their final amendments to S-1 by December 29. Additionally, the applicants were asked to ink a contract with an approved participant (AP) and work out their preferred cash-create redemption model. This signifies that it is likely that we will find out today which of 14 contenders might be the first to receive tentative approval for a spot BTC ETF, anticipated early next year.
According to Eric Balchunas, Bloomberg’s eminent ETF analyst, numerous ETF applicants have adapted their applications to feature the cash-create redemption model. By December 22, seven applicants tailored their applications to cash-create, the rest included both cash-create and in-kind models in their statements of registration. A bulk of existing ETFs employ in-kind creation, signifying that when intermediaries aspire to produce new ETF shares, they present companies such as BlackRock with funds using actual assets like Bitcoin. Balchunas commented that the majority (90%) of ETFs operate using an in-kind system, with the remaining 10% favoring cash.
The rationale behind the SEC’s preference for a cash model for spot Bitcoin ETFs is to limit the number of intermediaries capable of physically handling Bitcoin throughout the offering and redemption processes. Balchunas stated that many of these firms had planned on creating unregistered subsidiaries to replace actual broker-dealers, but the SEC rejected this idea. He mentioned that regulators were cautious about potential money laundering and preferred a 'closed-loop' system with fewer intermediaries in contact with Bitcoin.
Apart from expressing a preference for the cash-create model, ETF applicants need to sort an established AP by today. Balchunas said that he believed most agreements would be signed and that trading powerhouses Jane Street and Virtu Financial are the probable APs for everyone. ARK and 21Shares, in their most recent amendments filed on December 28 concerning spot Bitcoin ETF, didn’t name an AP. Balchunas anticipated that this information would likely be disclosed in the final update, just before launch. However, it remains unclear whether they have signed an agreement.
Published At
12/29/2023 4:02:26 PM
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