SEC’s Specific Guidance for Spot Bitcoin ETFs
The U.S. Securities and Exchange Commission (SEC) has reportedly offered detailed advice to exchanges looking to list and trade spot bitcoin exchange-traded funds (ETFs). This development has sparked a wave of optimism among market participants, as the SEC appears to be making progress in providing much-needed clarity on the approval process for spot bitcoin ETFs.
Bloomberg ETF analyst Eric Balchunas recently tweeted that the SEC’s Division of Trading and Markets has been engaged in discussions with exchanges, advising them to use the cash creation method instead of the in-kind method for spot bitcoin ETFs. This news has been met with cautious optimism, signaling a potential breakthrough in the regulatory landscape for cryptocurrency-related financial products.
SEC Advice on Creating ETF Units
ETF units can be created in-kind or in cash, with the former involving authorized participants providing cash to the ETF issuer in exchange for new ETF units. According to Balchunas, opting for cash creation makes sense as it places the onus on issuers to transact in bitcoin and alleviates limitations for broker-dealers, who would otherwise be required to use unregistered subsidiaries or third-party firms to handle BTC transactions.
Marshall Beard, Chief Strategy Officer at crypto exchange Gemini, views the SEC’s advice as a positive step, noting that the evolving debate between cash and in-kind creation methods is gradually gaining clarity. On the other hand, Gabor Gurbacs, strategy advisor at Vaneck, has expressed concerns over the SEC’s preference for cash creation, arguing that in-kind creates are more efficient, especially from a taxation and spread perspective.
SEC’s Path Forward and Market Expectations
SEC Chairman Gary Gensler recently revealed that the securities regulator is considering eight to 10 spot bitcoin ETF applications, leading many to anticipate the approval of multiple spot bitcoin ETFs early next year. As the SEC continues to engage with exchanges and market participants, the prospects for spot bitcoin ETF approval appear to be improving, albeit with ongoing debates on the most suitable creation method.
Hot Take
The SEC’s Progress on Spot Bitcoin ETFs Marks a Positive Step for Investors and Regulators
Amid ongoing discussions and guidance provided by the SEC to exchanges, the path toward spot bitcoin ETF approval seems to be gaining clarity. The SEC’s engagement with market participants is an encouraging sign, as it signals the regulator’s commitment to understanding and addressing the complexities of cryptocurrency-related financial products. While debates persist regarding the most advantageous creation method, the overall progress in discussions and guidance from the SEC bodes well for investors and market participants awaiting the approval of spot bitcoin ETFs.
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