|
|
According to Fox Business News, large Wall Street fund management companies increasingly believe that the U.S. Securities and Exchange Commission (SEC) will approve the first "spot" Bitcoin exchange-traded fund (ETF) in early January, thereby creating history in the cryptocurrency market.
Insiders close to these companies indicate that recent guidance from SEC officials suggests that the green light is likely to come by January 10, 2024. This marks the deadline for the SEC to approve or reject the application of the first company, Ark Investment Management, collaborated with 21Shares, to launch a spot Bitcoin ETF in partnership with Cathie Wood.
Currently, about a dozen companies, including BlackRock and Fidelity, major Wall Street asset management giants, have applied for spot Bitcoin ETFs, which value ETFs based on real-time prices of digital assets.
Personnel from these companies believe that the SEC may approve multiple applications simultaneously. The SEC spokesperson declined to comment on this matter.
If approved as anticipated, this would signify a significant step towards mainstreaming cryptocurrency in the U.S. The SEC Chairman, Gary Gensler, a prominent figure on Wall Street, had been reluctant to acknowledge this until a recent ruling by the U.S. Court of Appeals for the District of Columbia Circuit weakened his authority in cryptocurrency regulation.
A Bitcoin spot ETF would provide retail investors with more exposure to the world's largest cryptocurrency, with lower costs than Bitcoin ETFs priced in the futures market, which have already been approved. Additionally, investors can purchase ETFs through highly regulated fund management companies when trading on the New York Stock Exchange and Nasdaq stock market, avoiding unregulated exchanges.
One disadvantage for investors is that the SEC has imposed unusual requirements on the structure of ETFs. In talks with major fund management companies, the SEC insists that applicants use cash to purchase ETF shares rather than using the related assets, in this case, Bitcoin. Traditional ETFs allow so-called "in-kind" transactions, where market makers can exchange Bitcoin for ETF shares. The "cash creation" approach means ETF issuers must convert Bitcoin into cash in each transaction, a longer and more complex process where issuers have to purchase Bitcoin themselves instead of through brokers.
Securities lawyers point out that another drawback of cash creation is that investors will lose a significant tax advantage; "in-kind" purchases are not a taxable event, but selling Bitcoin for cash before purchasing ETF shares would be a taxable event.
Some spot Bitcoin ETF applicants, such as Grayscale, are hesitant about whether to abandon in-kind subscriptions. In a meeting with the SEC on Tuesday, Grayscale told the agency that it believes providing both in-kind and cash creation and redemption is in the best interest of investors, as it supports a "more in-depth, robust primary market, leading to a more efficient ETP market structure."
Dave Weisberger, Co-CEO of CoinRoutes, stated, "Cash creation essentially shifts the burden of trading Bitcoin from professional trading firms to authorized participants (APs) like Morgan Stanley and Goldman Sachs. This means less competition among issuers, and performance will depend on which issuer has better resources and trading strategies."
Weisberger said the SEC insists on cash redemption rather than in-kind redemption because the agency currently does not allow brokers like Robinhood and Fidelity to directly trade spot Bitcoin. The exact reason why the agency continues to prevent brokers from trading spot Bitcoin is unclear, but Weisberger believes it is closely related to the tense situation in Congress regarding digital assets. One explanation given by those who met with the SEC is that the commission is concerned about Bitcoin being used for money laundering, market manipulation, and other illegal purposes.
A former SEC official attributes this to Gensler's widespread aversion to digital assets. He believes Gensler wants to "slow down" new crypto products. Gensler has not made a clear determination regarding the actual status of Bitcoin, whether it is a loosely regulated commodity or a security that the commission needs to fully regulate, during his tenure as SEC chairman. Ethereum, the second-ranked cryptocurrency, faces a similar situation. While Gensler has stated in the past that most other cryptocurrencies are considered securities, he has remained silent on this matter during his tenure as SEC chairman.
According to FOX Business, BlackRock, the world's largest asset management firm with $9 trillion in assets under management, has made obtaining SEC approval for its proposed Bitcoin ETF a top priority. Larry Fink, BlackRock's founder and CEO, referred to Bitcoin as an "international asset" and "store of value," placing its status on par with gold.
BlackRock, with over 400 traditional ETFs in the market, has held five meetings with the SEC on its spot Bitcoin ETF application, with the most recent meeting taking place this week. SEC staff has held approximately 24 meetings with various ETF candidates, signaling the agency's intensified efforts to bring these ETFs to the market in the new year.
Of course, there is also the possibility that the SEC may reject all applications, but industry officials consider this possibility to be low. This is because in August of this year, the Washington D.C. Circuit Court of Appeals overturned the SEC's rejection of crypto asset management company Grayscale's application to convert its GBTC trust into a spot Bitcoin ETF. The three-judge panel deemed the SEC's actions "arbitrary and capricious."
This ruling is considered a significant precedent, and fund managers seeking approval for spot Bitcoin ETFs could use it as a basis if their applications are rejected by the SEC. |
|
Post time 25-12-2023 14:41:23