YEREVAN (CoinChapter.com) — The US Securities and Exchange Commission (SEC) has outlined three major concerns regarding spot Bitcoin Exchange-Traded Funds (ETFs), prompting a proactive response from issuers. These concerns include the redemption model, disclosure of authorized participants, and managing hard forks and airdrops.
SEC’s Key Issues with Bitcoin ETFs
The SEC has several issues with the possibility of a spot Bitcoin ETF. Here are the main three.
- Redemption Model: The SEC favors a cash redemption model for Bitcoin ETFs. In this model, the ETF issuer transfers stored Bitcoin and sells it to provide cash to investors, as opposed to an in-kind model where investors exchange shares for the underlying securities or commodities. Issuers like BlackRock and Grayscale have shown a willingness to adopt this model.
- Authorized Participants Disclosure: The SEC has pushed for disclosing authorized participants in the ETFs. These participants are registered broker-dealers involved in the ETF creation and redemption processes. Major firms have started naming these participants in their amended filings, a move not customary in traditional ETFs but seen as crucial in addressing the SEC’s transparency requirements.
- Handling Hard Forks and Airdrops: To manage concerns regarding hard forks and airdrops in the cryptocurrency space, issuers have agreed to protocols where the ETFs will relinquish entitlements to any hard fork that diverges from the main Bitcoin chain. This addresses the SEC’s concerns about the complications arising from such blockchain events.
These measures signify the issuers’ commitment to align with SEC guidelines and demonstrate a collaborative approach to addressing regulatory hurdles. As the approval process for Bitcoin ETFs progresses, these actions could play a pivotal role in shaping the landscape of cryptocurrency investment products.
Will Gary Gensler Approve the ETF in 2024?
Currently, there are several key players in the Bitcoin ETF race, including financial giant BlackRock. Other applicants include Valkyrie Investments, ARK Invest, the largest crypto investment vehicle, Grayscale, Fidelity, etc.
Notably, SEC Chair Gary Gensler commented earlier that his decision would not change, as he considered crypto investments, including Bitcoin(BTC), to be risky. Then, in late September, the Commission claimed it needed more time to consider the rule change, using the last available delay.
The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change, as modified by Amendment No. 3, and the issues raised therein. Accordingly, the Commission… designates January 10, 2024, as the date by which the Commission shall either approve or disapprove the proposed rule change,” the SEC announced.
However, players like BlackRock can be persuasive. The financial giant has famously gotten 575 ETFs approved against a single rejection. So, the SEC might choose to contend with the applicant and its trillions. The agency is currently in negotiations with BlackRock, as CoinChapter reported previously.
While BlackRock’s potential impact on the cryptocurrency market is questionable, the spot Bitcoin ETF approval could push BTC price well over $50,000 in 2024.
