The US Securities and Exchange Commission (SEC) is likely to approve a Bitcoin spot ETF soon, according to informed sources. The SEC has reportedly requested all applicants to use a cash creation/redemption model and to remove all indications of physical redemption from their documents.
Background:
BlackRock yields to SEC and adopts “cash redemption,” updates Bitcoin spot ETF code IBIT.
Galaxy Digital predicts the approval date of the Bitcoin spot ETF: before January 10, 2024, due to the Grayscale lawsuit clearance.
The SEC is currently reviewing over 10 applications for Bitcoin spot ETFs, including those from major asset managers such as Grayscale, BlackRock, and Fidelity, who are looking to convert their Bitcoin trust funds, including GBTC, into Bitcoin spot ETFs.
Several analysts predict that the first approved Bitcoin spot ETF will be seen in mid-January next year. And today, an important sign that the SEC is likely to approve has emerged. According to FOXBusiness reporters Charles Gasparino and Eleanor Terrett, who posted at around 4 a.m. today:
Shortly after, Bloomberg analyst Eric Balchunas also responded to this event. However, he stated that it was not a large conference call between the SEC and all Bitcoin spot ETF issuers, but multiple meetings with exchanges/issuers requesting them to choose cash creation. Otherwise, they would have to wait. But this is a good sign.
Eric had previously mentioned the SEC’s insistence on the cash model for Bitcoin spot ETFs:
Cash Creation/Redemption vs. Physical Creation/Redemption
First, in the cash purchase model, authorized participants (APs) use cash to create or redeem shares of the Bitcoin spot ETF. This means that APs provide cash to the ETF fund, and the fund manager uses this cash to purchase Bitcoin.
The impact of this model is that it may increase costs and tax complexity related to cash flow. Due to the involvement of cash transactions, there may be issues with capital gains tax. In addition, cash redemption may affect the tracking accuracy between the ETF and the actual market price of Bitcoin.
In the physical purchase model, APs use actual Bitcoin to create or redeem shares of the Bitcoin spot ETF. This means that APs directly deliver Bitcoin to the ETF in exchange for newly created ETF shares or, upon redemption, exchange ETF shares for the corresponding amount of Bitcoin.
The impact of this model is that it avoids tax issues arising from cash transactions and better maintains consistency between ETF assets and the Bitcoin market price.
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Cash Purchase Model Diagram. Source: BlackRock
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Related Reports:
Bitcoin Spot ETF Green Light? SEC Chairman Gary Gensler: Will reconsider applications based on the “successful outcome” of the Grayscale case.
Bitcoin Spot ETF Frontline: SEC releases details of discussions with BlackRock and Grayscale: physical redemption, cash redemption.
Wall Street giant VanEck predicts “Bitcoin to reach a new historical high within a year”! All BTC spot ETF applications will be approved together.
Bitcoin Spot ETF Expert: BlackRock revises “physical redemption model” to potentially meet SEC requirements.
Tags:
SEC
Physical Redemption
Bitcoin
Bitcoin Spot ETF
Cash Creation