Big Money Management Firms anticipate Approval for First Bitcoin ETF
According to sources close to big money management firms, the Securities and Exchange Commission (SEC) is expected to grant approval for the first “spot” Bitcoin exchange-traded fund (ETF) in early January. Recent guidance from SEC officials suggests a green light will likely come by January 10, 2024. This application was submitted by Ark Investment Management in collaboration with 21Shares. Renowned Wall Street asset managers such as BlackRock and Fidelity have also applied for a spot Bitcoin ETF.
Increased Exposure and Lower Costs
If approved, a spot Bitcoin ETF would provide retail investors with increased exposure to the largest cryptocurrency at a lower cost compared to Bitcoin ETFs already approved and based on futures markets. Additionally, investors would be able to access Bitcoin through regulated money management firms, bypassing unregulated exchanges, as these ETFs would be traded on the New York Stock Exchange and Nasdaq.
Cash Redemption and Tax Implications
During meetings with major money management firms, the SEC has insisted that applicants use cash to purchase shares of the ETF rather than the underlying asset, Bitcoin. This creates a more complex process as ETF issuers would have to exchange Bitcoin for cash in each transaction. Furthermore, selling Bitcoin for cash before purchasing the ETF would incur taxable events, unlike in-kind purchases which are not subject to taxation. Some spot Bitcoin ETF applicants, like Grayscale, have argued in favor of offering both in-kind and cash creations and redemptions to create a more efficient market structure.
BlackRock, the world’s largest money manager, has made obtaining SEC approval for its proposed Bitcoin ETF a top priority. CEO Larry Fink believes that this move would democratize the cryptocurrency market and make it more accessible for retail investors. BlackRock has engaged in multiple meetings with the SEC regarding its spot Bitcoin ETF application.
While there is a possibility that the SEC may deny all applications, industry officials consider it unlikely. The US Court of Appeals for the District of Columbia Circuit has ruled in favor of Grayscale, ordering the SEC to reopen the review process and set aside its earlier rejection of Grayscale’s application.
