In a recent X post, Bloomberg ETF analyst Eric Balchunas revealed that the U.S. Securities and Exchange Commission’s (SEC) Trading & Markets division has been in discussions with cryptocurrency exchanges regarding spot Bitcoin exchange-traded fund (ETF) applications.
Bitcoin ETF Shift: SEC Favors Cash Creates
According to Balchunas, the SEC has advised exchanges that it prefers ETFs to use cash creates rather than in-kind transactions. The SEC has reportedly requested exchanges to submit amendments in the coming weeks.
Balchunas characterized the SEC’s stance as unsurprising but viewed it as a positive indication of progress in the ETF approval process. He emphasized the SEC’s preference for cash creates, as it places the responsibility on issuers to transact in Bitcoin without involving broker-dealers who cannot directly handle the cryptocurrency.
The analyst pointed out that only 2-3 filers had initially planned to use cash creates, while the majority favored in-kind transactions. This development may necessitate adjustments by filers to align with the SEC’s preference or risk potential delays in the approval process.
While acknowledging the SEC’s perspective on cash creation, Balchunas noted that from an investor’s viewpoint, in-kind transactions might be more favorable due to considerations such as spread and taxation. He speculated that some issuers may push for in-kind transactions successfully during their engagements with SEC staff.
Despite these developments, Balchunas maintained the 90% odds, previously suggested with colleague James Seyffart, that the SEC would approve the spot Bitcoin ETF by January 10. It is notable that Canadian spot ETFs have been utilizing the cash-create model for several years.
However, the fate of Franklin’s spot Bitcoin ETF application remains uncertain. With no recent updates on the application, Seyffart anticipates a delayed order in the near future. The SEC initiated discussions on various ETF applications in late September, addressing concerns related to market manipulation and surveillance-sharing agreements.
As the deadline for ARK Invest’s spot Bitcoin ETF application approaches on January 10, 2024, market participants eagerly await the SEC’s decision on the much-anticipated approval or rejection of a spot Bitcoin ETF in the early months of next year.
Bitcoin Price Spike
Following the release of this news, the value of Bitcoin experienced a rapid increase of $800, surging from approximately $36,000 to $36,800 within a matter of minutes.
As of now, the current price of BTC is $36,444, and it boasts a 24-hour trading volume of $77.37 billion. Bitcoin’s market capitalization is noted at $712.32 billion, maintaining a market dominance of 51.22%. Over the past 24 hours, BTC’s price has experienced a slight uptick of 0.17%.
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