Firms Address SEC Concerns Over Bitcoin ETFs in Recent Meetings
Firms competing for a spot on a bitcoin exchange-traded fund (ETF) have been actively working to address the Securities and Exchange Commission’s (SEC) concerns in recent meetings. These meetings have led issuers like Grayscale to adopt a creation and redemption model preferred by the SEC and disclose authorized participants, which is an unusual step. Additionally, concerns regarding hard forks have also been addressed.
Grayscale Adopts Cash Model
Grayscale, after pushing for an in-kind model, finally acquiesced to the SEC’s desires during a meeting. The company argued for both in-kind and cash create and redemption models but failed to persuade the agency. As a result, Grayscale amended its S-3 form to adopt the cash model for its bitcoin ETF.
Naming Authorized Participants
Firms seeking to list a spot bitcoin ETF have started naming authorized participants, which is not customary but was pushed for by the SEC. BlackRock named Jane Street Capital and JP Morgan Securities LLC as authorized participants, while Valkyrie named Jane Street Capital and Cantor Fitzgerald. Authorized participants play a crucial role in the creation and redemption processes.
Managing Hard Forks and Airdrops
The issue of managing hard forks and airdrops has also been resolved. Discussions focused on establishing protocols to handle forks, with trusts agreeing to relinquish entitlements to diverging forks. Grayscale specified in its amended 3-S form that its bitcoin ETF would not receive tokens through hard forks or airdrops.
Exchanges Meet with SEC
NYSE, Nasdaq, and the Chicago Board Options Exchange met with the SEC to discuss pending filings this week. While these meetings do not indicate any changes in the SEC’s stance on spot bitcoin ETFs, they are significant steps in the approval process.
A Different Story for Ethereum
The approval of futures-based bitcoin ETFs by the SEC has complicated the prospects for a spot ether ETF. The agency rejected earlier proposals due to concerns of price manipulation, which it couldn’t prove with futures products. However, the SEC may reject ether-focused proposals for other reasons that don’t fall under the same constraints.
Hot Take: Progress Made in Bitcoin ETF Approval Process
Firms vying for a bitcoin ETF have made significant progress in addressing the SEC’s concerns. Meetings with the regulator have led to issuers like Grayscale adopting the cash model and disclosing authorized participants, which were unusual steps. The issue of managing hard forks and airdrops has also been resolved. While there is no guarantee of approval, these developments indicate positive momentum in the path towards a bitcoin ETF. It remains to be seen if similar progress will be made for an ether-focused product.
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