Spot Bitcoin ETF Approval: Insights into SEC’s Decisions and Recent Developments

Key Takeaways

• The SEC holds numerous meetings to negotiate the terms for ETF approvals.
• BlackRock modifies its Bitcoin spot ETF proposal to include the ability to trade shares for cash.
• Opinions from top analysts within the crypto industry on SEC’s impending decision on the US Exchange-Traded Fund (ETF) filings.

The SEC is focusing its efforts on getting ready for a historic event, with the approval of a Bitcoin exchange-traded fund (ETF) in 2024 being the primary focus.

The SEC recently hosted two different teleconferences with people who wanted to introduce Bitcoin exchange-traded funds (ETFs). These discussions emphasized the crucial organizational framework that these ETFs should follow in addition to delving into the nuances of the application process.

For both ETF purchases and redemptions, the SEC has made it very clear that it can only accept cash payments; thus, Bitcoin and any other payment methods will not be accepted. SEC staff members underline that this cash-only strategy eliminates any accounting for in-kind transactions.

Prominent participants such as BlackRock and Grayscale are prominent candidates seeking SEC approval. These organizations contend that including in-kind transactions will increase efficiency and support a more dynamic trading market, despite opposition to the SEC’s cash-only rule.

Leading entities involved in the SEC’s promotion efforts are CBOE, Hashdex, Bitwise, Ark 21Shares, Valkyrie, BlackRock, and Nasdaq. The sector has been fuelled with speculation that the SEC may hasten the approval process, maybe before year-end, based on the regulatory body’s subsequent silence. 

Interestingly, issuers are required to send revised reports by December 29. This means that there is a greater chance of approval before the January 10 deadline.

Black Rock Modifies its ETF Proposal

To conform to regulatory requirements, BlackRock modified its Bitcoin spot ETF proposal and included the ability to trade shares for cash. The well-known asset management behemoth temporarily abandoned its first preference for in-kind redemptions, according to a filing on December 18. As expressly stated in an amended S-1 filing, it adopted a different strategy that permits investors to create and redeem cash.

At first, BlackRock had provided the ETF with the necessary paperwork to allow for in-kind redemptions. This would have allowed investors to trade their fund units for the bitcoin that the ETF held. To comply with the SEC-approved cash model, the company had to turn the digital currency assets into cash to return shares to investors. BlackRock is hopeful that in-kind redemptions will be reinstated in the future, notwithstanding this modification.

Opinions from Analysts in the Industry

Many analysts predict that US Exchange-Traded Fund (ETF) filings will be approved in the first half of this year. James Seyffart and Eric Balchunas, two ETF experts for Bloomberg, predict that the U.S. Securities and Exchange Commission (SEC) will soon approve a spot Bitcoin ETF in January 2024. Even if candidates make last-minute changes to their submissions, this assumption still stands.

Seyffart gave an update on December 21 on X about the latest developments concerning BlackRock’s spot Bitcoin ETF. The December 18 amendment permits in-kind redemptions to be made using the SEC’s cash redemption procedure rather than non-monetary transfers like Bitcoin.

Seyffart brought attention to BlackRock’s substitution of “prime broker and the trade credit lender” for the term “prime execution agent” in the most recent iShares Bitcoin Trust ETF S-1 registration statement. The SEC has reservations about this modification. Seyffart wondered which entities would have to update their documents in response, considering the possible outcomes.

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