In its initial filing, BlackRock mentioned that the Prime Execution Agent would obtain BTC to support the ETF’s shares on a 1-to-1 ratio. Although the company didn’t disclose the name of the chosen agent, it did identify Coinbase as the proposed custodian.
BlackRock Inc (NYSE: BLK), the world’s largest asset manager, is putting the final touches to its plan for a Bitcoin exchange-traded fund (ETF). As part of the process, the company intends to use a third-party broker, which it regards as a “Prime Execution Agent” to handle BTC purchases and sales on its behalf.
This approach, however, has raised concerns about obtaining regulatory approval. According to ETF analyst James Seyffart, the Securities and Exchange Commission (SEC) may have a problem with having a separate entity responsible for acquiring Bitcoin for the ETF. This raises the question of whether other ETF issuers’ filings will need to be revised to reflect the SEC’s preferences.
Will be interesting to see who updates their documents after this. SEC might not be comfortable with a Prime Execution Agent (a 3rd party buying and selling bitcoin on behalf of the ETF) purchasing the #Bitcoin in the cash model . This is how BlackRock's is planned at moment: https://t.co/pGWUNp7Lw3 pic.twitter.com/2D60KX7OUI
— James Seyffart (@JSeyff) December 21, 2023
In its initial filing, BlackRock mentioned that the Prime Execution Agent would obtain Bitcoin to support the ETF’s shares on a 1-to-1 ratio. Although the company didn’t disclose the name of the chosen agent, it did identify Coinbase as the proposed custodian. Appointing Coinbase, which is the largest crypto exchange in the US, might cause concern at the SEC. The regulator has actively targeted crypto trading platforms this year and is currently involved in a legal dispute with Coinbase over violations of securities law.
Expert: January 10 Bitcoin ETF Approval Is 90% Sure
ETF expert Eric Balchunas shared his thoughts on recent talks between the SEC and asset managers. He mentioned that the SEC has emphasized a preference for the “cash create” model for ETF creation and redemption. This model involves issuing or canceling ETF shares in exchange for cash payments, rather than transferring the underlying assets.
We hearing it wasn't one giant conf call b/t SEC and every issuer but rather many calls to exchanges/issuers to reiterate that its Cash Creates or You Will Wait, which we knew already via chatter and the updated S-1s this week. Still, interesting & good sign for Jan tho @JSeyff
— Eric Balchunas (@EricBalchunas) December 21, 2023
When asked about the chances of approval by January 10th, Balchunas expressed optimism with a 90% chance. However, he cautioned that this estimate is based on the available information and the ongoing discussions regarding the ETF.
The recent changes in the filing highlight the efforts of ETF issuers to meet the SEC’s preferences and increase the likelihood of approval. Both BlackRock and groups like ARK 21Shares have modified their redemption procedures from in-kind transfers to cash create. Other firms, such as Hashdex and Bitwise, have increased their advertising, while VanEck has outlined plans to buy more Bitcoin.
These actions come after months of mounting evidence that the regulatory agency intends to permit spot Bitcoin ETFs. Through closed-door talks, public comments, and expert observations, confidence is growing regarding the SEC approving proposals in early 2024.
With industry leaders such as BlackRock and major issuers aligning their strategies with SEC guidance, January appears set to usher in a new era for crypto ETFs. In the coming weeks, it will be clear whether lingering concerns about specific details will hinder the impending wave of approvals. Analysts can only speculate about potential challenges and positive signs in the Bitcoin ETF space; nothing is sure until official decisions are made.