SEC Prefers Cash Settlements Over Bitcoin for Spot Bitcoin ETFs

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In a recent development, Bloomberg reports that the SEC is advising spot Bitcoin ETF issuers to opt for cash creations rather than in-kind creations for these ETFs. This move, seen as a positive step, signals progress in the approval process, despite the potential need for adjustments by the ETF filers.

Cash “creates” refer to the issuer transacting in cash instead of directly using Bitcoin. The SEC’s preference for cash creates stems from the fact that broker-dealers currently cannot handle Bitcoin directly. This adjustment addresses a key operational challenge, potentially streamlining the approval process.

Implications for ETF Applicants

f this information is emerging today, does it imply that ETF applicants need to refill or update their filings? While the SEC’s preference for cash creates may necessitate some adjustments, it doesn’t necessarily indicate a rejection. Instead, it could be a strategic move to ensure the sustainability and security of these financial products.

Speculations are already circulating, suggesting that if the approval doesn’t come through today, it might be wise to set sights on January 2024 for a potential breakthrough. The intricacies of regulatory processes often require time, and this adjustment in approach could be a part of the meticulous groundwork needed for a green light.

Cryptocurrency enthusiasts, ever eager for mainstream adoption, are expressing impatience. The sentiment is clear: “Just approve the bloody thing, Gary!” While the call for approval is resonating, it’s essential to acknowledge that regulatory bodies tread cautiously to ensure that all facets are considered before granting approval.

Amidst the urgency for approval, some skeptics argue that the government is likely waiting for a foolproof method to control the crypto space. The dynamics of decentralized currencies inherently challenge traditional regulatory frameworks, requiring careful calibration to strike a balance between innovation and oversight.

The announcement raises valid concerns, with one commentator questioning whether using cash “creates” could expose ETF providers to bankruptcy risks, particularly if Bitcoin’s value doubles while cash remains stagnant. The analogy to the FTX situation adds a layer of caution, emphasizing the need for a robust and adaptable regulatory framework.


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