A spot Bitcoin ETF approval would open doors for institutional and retail investors to access the world’s largest cryptocurrency with greater ease and at a lower cost compared to Bitcoin ETFs tied to the futures market.
BlackRock Inc (NYSE: BLK), the world’s largest money manager with a whopping $9 trillion in assets under management, has made obtaining approval for its proposed Bitcoin (BTC) Exchange-Traded Fund (ETF) a strategic corporate priority.
BlackRock Bitcoin ETF Push: Visibly Persistent Efforts
According to a recent report, BlackRock’s CEO, Larry Fink, has been vocal about Bitcoin as an “international asset” and a formidable “store of value”, echoing sentiments that challenge the traditional dominance of gold in this role.
With over 400 traditional ETFs already in the market, BlackRock is making a concerted effort to navigate the regulatory ecosystem for its spot Bitcoin ETF. The company has engaged with the Securities and Exchange Commission (SEC) in five meetings, the most recent of which took place on Tuesday. The SEC, having conducted approximately 24 meetings with various ETF hopefuls suggests a heightened focus on bringing crypto-related products to the market in the coming year.
According to sources, prominent asset management firms such as BlackRock and Fidelity are growing convinced that the SEC will create history by issuing the first “spot” Bitcoin ETF in early January 2024. Notably, recent guidance from SEC officials indicates a potential green light by January 10, 2024, which marks the final deadline for the SEC to decide on the application from Ark Investment Management in collaboration with 21Shares.
The approval of a spot Bitcoin ETF would mark a big step forward in the mainstream adoption of cryptocurrencies in the United States. SEC Chairman Gary Gensler, who has historically been cautious about endorsing crypto, is expected to shift grounds to help make this history.
Advantages and Challenges of Spot BTC ETF Approval
A spot Bitcoin ETF approval would open doors for institutional and retail investors to access the world’s largest cryptocurrency with greater ease and at a lower cost compared to Bitcoin ETFs tied to the futures market. Trading on reputable platforms such as the New York Stock Exchange and Nasdaq would provide a regulated environment, mitigating concerns associated with unregulated exchanges.
However, the SEC’s insistence on using cash for ETF transactions instead of the underlying asset presents challenges. This “cash create” route could lead to a longer and more complicated process, impacting investors’ tax advantages and potentially hindering the efficiency of the ETF market structure.
The SEC’s preference for cash transactions over “in-kind” transactions, where market makers exchange Bitcoin for ETF shares, raises questions about the regulatory body’s concerns regarding spot Bitcoin trading. Some industry experts speculate that the SEC’s reluctance may be linked to political tensions surrounding digital assets, particularly related to money laundering, market manipulation, and other illegal activities.
Despite the challenges, industry insiders express optimism, citing an important legal precedent set in August. The D.C. Court of Appeals overturned the SEC’s denial of Grayscale’s Bitcoin ETF application, deeming the regulatory body’s actions “arbitrary and capricious”. This ruling serves as a potential lifeline for money managers, providing a strong basis for appeal if their applications face rejection.