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The U.S. Securities and Exchange Commission (SEC) is likely to approve the first "physically-backed" Bitcoin Exchange Traded Fund (ETF) in early January 2024, a development that has energized major Wall Street asset management firms. According to several informed sources, recent guidance from SEC officials indicates that the approval may be announced on January 10, 2024. This also marks the final deadline for the application by Ark Investment Management, Cathie Wood's flagship firm, in collaboration with 21Shares. Over a dozen companies, including BlackRock and Fidelity, have submitted applications for physically-backed Bitcoin ETFs, and it is anticipated that the SEC may approve multiple applications simultaneously.
If approved as scheduled, this would be a significant step toward mainstreaming cryptocurrency in the United States. However, SEC Chairman Gary Gensler had previously expressed reservations about this move, and it wasn't until a recent court ruling that weakened his regulatory authority in the cryptocurrency space that the outlook changed. A Bitcoin physically-backed ETF would provide retail investors with more opportunities to access the world's largest cryptocurrency, with lower costs compared to approved Bitcoin ETFs priced in the futures market. Nevertheless, the SEC has unique requirements for the structure of ETFs, insisting that applicants use cash to purchase ETF shares and not allowing the use of Bitcoin or other related assets.
The SEC's decision has sparked some controversy because traditional ETFs allow for so-called "in-kind" transactions, whereas the SEC insists on the "cash creation" approach. This means that issuers must convert Bitcoin into cash in each transaction rather than directly trading Bitcoin on the exchange. One of the applicants for a physically-backed Bitcoin ETF, Grayscale, has indicated hesitancy about abandoning in-kind purchases, as the SEC's requirement could result in investors losing important tax benefits.
The SEC's stance is likely influenced by political tensions in Congress surrounding digital assets. Concerns about Bitcoin being used for money laundering, market manipulation, and other illegal purposes have led to the specific requirements for ETF structures. While industry insiders initially thought the SEC might reject all applications, precedents in rulings suggest that fund managers would have ample grounds for appeal if their applications were denied.
The world's largest asset management firm, BlackRock, has made obtaining SEC approval for its Bitcoin ETF a top priority, underscoring institutional interest in the cryptocurrency market. BlackRock's founder and CEO, Larry Fink, views Bitcoin as an "international asset" and a "store of value" comparable to gold. BlackRock has held multiple meetings with the SEC, demonstrating their positive attitude toward a Bitcoin ETF.
Overall, the SEC is expected to redouble its efforts in the new year to bring physically-backed Bitcoin ETFs to the market in early 2024. While the possibility of rejection exists, precedent-setting rulings make this outcome less likely. Investors and the industry are closely watching this decision, as it will have profound implications for the entire cryptocurrency market. |
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Post time 28-12-2023 12:26:53