Bloomberg ETF analyst pointed out that in recent weeks, the SEC has been actively meeting and negotiating with several institutions applying for a Bitcoin spot ETF. BlackRock had its third meeting with the SEC yesterday, and everyone is waiting to see if they can convince the SEC to accept their updated “physical redemption model,” which is expected to open the door for Wall Street institutions that cannot hold Bitcoin.
Cryptocurrency market has optimistic expectations for the SEC to approve a Bitcoin spot ETF in early next year. Bloomberg ETF analysts James Seyffart and Eric Balchunas firmly believe that the probability of a spot ETF being approved before January 10, 2024, is as high as 90%.
In recent weeks, the SEC has been actively meeting and negotiating with several institutions applying for a BTC spot ETF, which may indicate that the SEC is about to make a decision on whether or not to approve such products.
James Seyffart stated on Platform X today that in the past few days, four different issuers have met with the SEC regarding their Bitcoin spot ETF applications. BlackRock had its third meeting with the SEC in weeks, and Grayscale, Franklin Templeton, and Fidelity also met with the SEC last week.
He added that representatives from the SEC’s Trading and Markets Division and the Division of Corporation Finance attended each meeting. These two divisions will ultimately decide whether and when to approve or reject the 19b-4 and S-1 filings submitted by the issuers. Eric Balchunas stated that BlackRock is opening the door for institutions that cannot hold Bitcoin.
It is worth noting that the SEC’s publicly available memorandum shows that BlackRock modified its Bitcoin spot ETF’s physical redemption model during the second meeting with the SEC on November 28. This will allow Authorized Participants (AP) to create new shares in the fund using cash (rather than just cryptocurrencies).
According to reports from Coindesk and Cointelegraph, the updated “prepay” mode of BlackRock’s physical redemption model will allow Wall Street banking giants such as JPMorgan Chase and Goldman Sachs to act as APs for the fund. This enables these heavily regulated U.S. banks to bypass the restrictions of not being able to hold Bitcoin or cryptocurrencies directly on their balance sheets, thus opening the door for these institutions.
Under the revised model, APs will transfer cash to a broker-dealer (MM-BD), and the MM-BD will then convert the cash into Bitcoin, which will be stored by the ETF’s custodian provider (Coinbase Custody in BlackRock’s case).
BlackRock stated that the benefits of the updated physical model include reducing transaction costs, transferring risk away from participants, having more involvement from cryptocurrency market makers, and providing excellent resistance to market manipulation. Market manipulation has been a major reason for the SEC’s rejection of spot ETFs.
So far, the prevailing view is that APs should be large market makers in the cryptocurrency field, such as Jane Street and Jump Trading, rather than Wall Street banks. However, this change in structure means that banks are now able to participate and expand the team of liquidity providers. Sui Chung, CEO of CF Benchmarks, pointed out in an interview with Coindesk:
Related Reports:
BlackRock’s Bitcoin spot ETF has received a £100,000 “seed fund”! Significant meaning, according to Bloomberg analyst
Is Google paving the way for a Bitcoin ETF? Ads unban: Allow “cryptocurrency trust advertising” to be updated by the end of January next year
SEC Chairman refuses to discuss the progress of “Bitcoin spot ETF” and secretly meets with BlackRock to negotiate Bitcoin redemption mechanism.