SEC Expected to Give Priority to, Says Analyst
A Senior analyst at Bloomberg ETF suggested that the Securities and Exchange Commission (SEC) may have a preference for a specific redemption structure when approving applications for spot Bitcoin exchange-traded funds (ETFs).
According to Eric Balchunas, an ETF expert, the SEC may choose to approve spot Bitcoin ETFs with a cash create redemption structure. However, this decision has not been confirmed by the SEC.
Cash create redemption differs from the alternative “in-kind” option. With cash create, issuers must hold the equivalent value of every Bitcoin offered in the ETF in cash. On the other hand, the in-kind model only requires the operator to hold Bitcoin with a trusted custodian.
Experts believe that the in-kind redemption model would be more advantageous for investors as it reduces operating costs for issuers and has better tax consequences. Balchunas mentioned that several issuers are prepared to offer their ETFs under the cash create model.
However, it is reported that BlackRock, a major player on Wall Street, is advocating for in-kind redemptions.
The SEC is currently reviewing filings from 13 applicants, including Grayscale’s bid to convert its Bitcoin Trust (GBTC) into an ETF. Grayscale has recently hired John Hoffman, a seasoned ETF professional from Invesco, to oversee its distribution and partnership strategy.
Experts predict that Bitcoin ETF approvals are most likely to occur in January 2024, based on discussions between the SEC and applicants. Previously, there was little to no dialogue between regulators and issuers, except for denial responses from the SEC.
SEC Chairman Gary Gensler has not provided a specific timeline for approval but confirmed that applications are under review.
In summary, the SEC may favor spot Bitcoin ETFs with a cash create redemption structure, although this has not been officially confirmed. The in-kind redemption model is believed to be more beneficial for investors. The SEC is currently reviewing multiple applications, and Bitcoin ETF approvals are expected in January 2024. SEC Chairman Gary Gensler has not disclosed a timeline for approval but acknowledged that applications are being reviewed.
