Bloomberg Analyst Shares Insights on SEC’s Requirements for Spot Bitcoin ETFs
Analyst Eric Balchunas from Bloomberg has provided information on the recent requirements set by the U.S. Securities and Exchange Commission (SEC) for regulating third-party involvement in Spot Bitcoin ETFs. The SEC has mandated that spot Bitcoin exchange-traded fund (ETF) applicants submit their final S-1 amendment by December 29, 2023.
Deadline requirements include entering into agreements with Authorized Participants (APs) and specifying the redemption models to be used. Balchunas emphasizes the significance of the S-1 Amendment deadline and the challenges of identifying APs for approval.
Concerns over Additional Requirement and Applicants’ Choices
The SEC not only demands that APs be named in the documents but also serve as underwriters, guaranteeing the issuance of new ETF shares. This requirement raises concerns among potential APs due to legal risks associated with the asset class.
Out of the 14 applicants, seven have chosen a cash-create structure, while others have opted for a combination of cash-create and in-kind models in their registration statements.
Optimism for Approval and Potential Benefits
Despite previous disapprovals, industry insiders, including Balchunas and analyst James Seyffart, remain optimistic about the SEC approving a spot Bitcoin ETF this time. The SEC is scheduled to announce its verdict on the Ark and 21Shares ETF application on January 10, 2024.
If approved, a spot Bitcoin ETF would be listed on traditional stock exchanges, making it easier for retail investors to trade through standard brokerage accounts. This could streamline retail investment in crypto and potentially increase demand.
Hot Take: SEC’s Control in Spot Bitcoin ETFs
The SEC’s requirements for Spot Bitcoin ETFs aim to enhance control by trimming intermediaries and ensuring transparency in the regulatory process. By setting deadlines and mandating agreements with APs, the SEC is taking steps to regulate the involvement of third parties in ETFs. The approval of a spot Bitcoin ETF could have significant implications for the crypto market, making it more accessible to retail investors and potentially driving increased demand.
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