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SEC directs spot Bitcoin ETF applicants to make final changes to applications

Regulation: SEC directs spot Bitcoin ETF applicants to make final changes to applications

U.S. Securities and Exchange Commission (SEC) officials convened on Thursday with delegates from at least seven firms aiming to introduce exchange-traded funds (ETFs) linked to spot bitcoin in early 2024. According to public memos and insiders, the SEC instructed two of these companies to submit final revisions by the end of next week.

Among the participants in the discussions were representatives from prominent organizations such as #BlackRock, #Grayscale Investments, #ARK Invest, and #21 Shares.

By January 10, the SEC will decide whether to approve or reject the joint proposal put forth by ARK and 21 Shares. It is widely anticipated that the SEC will grant approval to multiple applications in the days leading up to the deadline.

Executives from two of the companies involved in the meetings, speaking anonymously due to the confidential nature of the discussions, revealed that the SEC set a deadline of December 29 for final updates to their filings. Attendees were informed that failure to meet this deadline would exclude them from the initial wave of potential spot bitcoin ETF approvals in early January.

Representatives from exchanges where the new products may be traded, including #Nasdaq and #Cboe, as well as legal representatives for the issuers, were also present at the meetings, as stated in the meeting memos.

In recent years, the SEC has rejected numerous applications for spot bitcoin ETFs, citing concerns about market manipulation in the cryptocurrency industry. The agency has only approved cryptocurrency ETFs tied to #Bitcoin and #Ethereum futures contracts traded on the Chicago Mercantile Exchange.

However, there are indications that regulators may be more inclined to approve some of the 13 proposed spot bitcoin ETFs. Some attribute this shift to a federal appeals court ruling in August, which found that the SEC made an error in rejecting Grayscale's proposal to convert its trust into an ETF.

According to two executives who participated in the meetings with SEC officials, the agency hinted that it could grant approval in the first few business days of 2024. Regulators would inform issuers directly of the "effective" launch date for their ETF requests, allowing each proposed ETF to be rolled out accordingly.

An SEC spokesperson declined to comment on individual filings, as is customary for the agency.

Several issuers have made technical adjustments to their ETF proposals in recent days. Both BlackRock and ARK updated their filings earlier this week to accommodate cash redemptions, a change requested by regulators, according to insiders familiar with the matter.

Final revisions would also include details about the fees associated with the ETFs. ARK and 21 Shares are the only issuers to disclose the proposed fee for their joint ETF, set at 0.80%.

Additionally, the updates would provide information about the initial capitalization of the new ETFs. While these amounts are expected to be relatively small, insiders involved in the discussions anticipate a significant increase once the ETFs begin trading. This initial capitalization, often referred to as "seeds," ensures sufficient liquidity in the market for new ETFs by providing capital to market makers.

Overall, the meetings between #SEC officials and representatives from various companies indicate progress towards the potential approval of spot bitcoin ETFs, with the SEC potentially granting approval in early 2024.

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