Wall Street titans like BlackRock, a manager of $9 trillion in assets, and Fidelity stand ready to unleash bitcoin exchange-traded funds (ETFs) onto U.S. markets, as Securities and Exchange Commission (SEC) guidance points to approvals in early January.
The SEC must approve or deny spot bitcoin ETF applications by January 10th. A spot Bitcoin ETF prices off the real-time value of Bitcoin. Sources close to major asset managers believe the SEC plans to greenlight multiple applications at once, marking a watershed moment for mainstream cryptocurrency adoption.
SEC’s Cash-Only Stance Challenges Bitcoin ETFs
If approved, bitcoin ETFs would allow everyday investors to gain exposure to the world’s largest cryptocurrency through trusted institutions at less cost than current bitcoin futures ETFs. Shares would trade on major stock exchanges like the NYSE and Nasdaq.
However, the SEC insists applicants only accept cash, not bitcoin itself, when issuing ETF shares. This “cash creation” approach forces ETF managers to constantly exchange bitcoin for cash, adding layers of complexity. It also deprives investors of certain tax advantages.
Some applicants resist the cash creation stipulation. Grayscale believes enabling both cash and “in-kind” Bitcoin transactions best serves investors. But the SEC remains firm, as it still blocks broker-dealers from trading spot bitcoin directly.
BlackRock’s Push: Overcoming SEC Hurdles
The agency cites money laundering, manipulation, and other illegal uses as justification. However, some blame Chairman Gary Gensler’s general skepticism of digital assets. Gensler has not definitively classified Bitcoin as a commodity or security. The same goes for ethereum.
Industry insiders give SEC denials low odds after a recent court victory. In August, the D.C. Court of Appeals overturned the SEC’s rejection of a Grayscale Bitcoin ETF conversion. The precedent should strengthen current applications.
Eager to capitalize is BlackRock, a manager of $9 trillion in assets. CEO Larry Fink calls Bitcoin an international store of value rivaling gold. BlackRock holds over 400 ETFs and continues lobbying the SEC on Bitcoin. With around 24 crypto ETF meetings this year, the agency appears intent on 2023 approvals.
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