The SEC website showed one memorandum with details of a discussion with BlackRock, and another one on a discussion with Grayscale.
The US Securities and Exchange Commission (SEC) on Sunday revealed on its website one memorandum detailing discussions with financial giant BlackRock (NYSE: BLK), and another with crypto asset manager Grayscale Investments. These memos involved proposed rule changes concerning the listing and trading of spot Bitcoin exchange-traded funds (ETFs) by both companies.
SEC Memorandum May Indicate Progress with BlackRock and Grayscale ETF
One memorandum from the SEC showed that on November 20th, the Commission deliberated on rule modifications for the listing and trading of the iShares Bitcoin Trust ETF. The discussions noted two distinct ETF redemption models: the In-Kind Redemption Model and the In-Cash Redemption Model. The former involves final redemptions in Bitcoin shares held by the ETF. On the other hand, the latter swaps Bitcoin shares for equivalent cash. In a tweet, Bloomberg ETF analyst James Seyffart noted BlackRock’s apparent preference for the In-Kind Redemption Model.
Looks like @BlackRock also met with SEC! There’s a couple slides in relation to in-kind vs cash creation. Based on this it looks like BlackRock prefers in-kind for their #bitcoin ETF (makes sense as its probably cleanest structure for them & end investors)
h/t @btcNLNico https://t.co/AK0XspL4zJ pic.twitter.com/eeuUT9T5mn
— James Seyffart (@JSeyff) November 22, 2023
BlackRock and several other firms like Fidelity, WisdomTree, Invesco, Valkyrie, VanEck, and Bitwise are anticipating SEC responses for their spot Bitcoin ETF applications. The general market opinion is optimistic about the possibility of approval by January.
Grayscale So Far
Grayscale, which applied to convert its Grayscale Bitcoin Trust (GBTC) to a spot ETF, engaged in discussions with the SEC. Nate Geraci, President of ETF Store, revealed vital insights following Grayscale’s recent SEC meeting, explicitly emphasizing the terminology used around Grayscale Bitcoin Trust’s ‘conversion’ being termed an ‘uplisting.’ Geraci noted that this terminology doesn’t imply hurdles in transitioning to an ETF.
Highlighting Grayscale’s potential, Geraci pointed out a significant opportunity for the company to take the lead. He said this could happen if they “uplist GBTC to NYSE Arca on same day other issuers launch spot BTC ETFs.” He also emphasized the importance of competitive fees as a strategic advantage.
Geraci’s analysis projected Grayscale’s robust entry into the market. It envisions the company commencing operations with a substantial $20 billion in assets under management. This forecast holds weight even in light of BlackRock’s involvement in the space.
Industry Dynamics and Regulatory Progress
The discussions between these financial powerhouses and the SEC reflect a broader trend within the cryptocurrency space. The quest for spot Bitcoin ETF approval has been a protracted journey, with various firms seeking regulatory consent amid evolving market dynamics.
Grayscale’s recent legal victory and ongoing discussions signify a paradigm shift, highlighting the industry’s persistence in pushing for mainstream crypto investment vehicles. However, uncertainties persist, mirroring the SEC’s cautious approach. The SEC has always complained that previous proposals did not adequately address market manipulation and other problems.
As the SEC refrains from disclosing details of these recent talks, the industry remains apprehensive, awaiting the regulator’s recommendations. The market implications of a potential approval or rejection loom large, with significant ramifications for the general market.