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SEC Progresses Talks With US Bitcoin ETF Issuers

Bitcoin Regulation | Dec 13, 2023

Bitcoin exchange-traded funds (ETFs) listing discussions between the SEC and asset managers have progressed suggesting that the SEC may soon approve these innovative financial products.

Here's what you need to know:

  • As reported by Reuters, the talks have reached a stage where key technical aspects are being discussed. This includes custody arrangements, creation and redemption mechanisms, and investor risk disclosures indicating a readiness to consider Bitcoin ETFs seriously.
  • The SEC began meaningfully engaging with issuers following a federal appeals court ruling that the agency failed to justify its rejection of Grayscale's ETF application. This has led to a more constructive dialogue between the SEC and ETF issuers.
  • Thirteen firms, including Grayscale Investments, BlackRock, Invesco, and ARK Investments, have pending applications with the SEC for ETFs tracking the price of Bitcoin.  The SEC has until January 10 to decide on ARK's filing, which is first in line.
  • Industry leaders express optimism, with ARK CEO Cathie Wood stating, "The odds of several applications being approved had gone up," reflecting a positive sentiment among market participants.

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  •  A spot Bitcoin ETF would be a massive milestone, offering investors access to the world's largest cryptocurrency through the regulated stock market. The demand for such a product is expected to be high, with estimates of up to $3 billion in the initial days.
  • Despite the progress, there are still unresolved issues, such as whether issuers will create a cash or an "in-kind" settlement mechanism. SEC Chair Gary Gensler, known for his negative stance on crypto, has not indicated a timeline for considering the ETF filings.

Outlook

This development is crucial for investors and financial institutions alike, as it could lead to increased acceptance and integration of cryptocurrencies into diversified investment portfolios. It also sets a precedent for how regulatory bodies globally might approach emerging financial technologies, balancing innovation with investor protection.


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