- Grayscale and BlackRock are actively engaging with the SEC to launch the first spot Bitcoin ETF in the United States.
- Discussions focus on the operational models of the ETF, with BlackRock favoring an “in-kind” redemption model.
A New Era in Crypto Investments: The Race for the First US Spot Bitcoin ETF
In a significant development for the cryptocurrency sector, Grayscale and BlackRock are spearheading efforts to introduce the first spot Bitcoin Exchange-Traded Fund (ETF) in the United States. This move, indicative of the evolving landscape of digital asset investments, involves close consultations with the U.S. Securities and Exchange Commission (SEC).
🔒 The SEC is engaging in discussions… pic.twitter.com/gbGXKspAw3
— Collin Brown (@CollinBrownXRP) November 22, 2023
Debating the Ideal ETF Model: Cash vs. In-Kind Redemption
At the heart of these discussions is the decision between two operational models for the ETF: the cash model and the “in-kind” redemption model. BlackRock has shown a preference for the latter, deemed a cleaner option for both asset managers and investors. This model involves a five-step process where ETF shares are delivered to a Transfer Agent, contrasting with the cash model that requires moving Bitcoin out of cold storage and trading it for USD.
The “in-kind” model, favored by BlackRock, is seen as a more streamlined approach. It starts with a Market Maker placing an order through an Authorized Participant, followed by the ETF issuer approving the order and the Market Maker purchasing ETF shares on a Listing Exchange. The ETF shares are then delivered to a Transfer Agent, with the Bitcoin custodian releasing the coin to the Market Maker.
Grayscale’s Revised Filing and the SEC’s Stance
Grayscale, on the other hand, has submitted a revised spot Bitcoin ETF filing, following discussions with the SEC. Their filing indicates a preference for cash redemptions only upon approval by the sponsor, reflecting a cautious approach in line with regulatory expectations. The SEC’s current stance leans towards cash creates, with concerns around broker-dealers handling Bitcoin directly.
Implications for the Crypto Market and Investors
These developments are closely watched by the crypto community, as the approval of a spot Bitcoin ETF in the US would mark a watershed moment. It would not only legitimize digital assets further but also offer investors a more direct and regulated way to invest in Bitcoin.
As the crypto industry awaits the SEC’s decision, the discussions between Grayscale, BlackRock, and the regulatory body signal a growing maturity and acceptance of cryptocurrencies in mainstream finance. This dialogue represents a crucial step in bridging the gap between traditional financial systems and the innovative world of digital assets.