(Kitco News) - Analysts continue to expect the imminent launch of the first spot Bitcoin (BTC) ETF following the revelation that the Securities and Exchange Commission (SEC) held a joint conference call with multiple applicants to discuss the finer points of their applications.
According to an X post from Fox Business correspondent Charles Gasparino, the SEC had “what’s described as a rare joint conference call with prospective ‘spot’ BTC ETF filers, as its closely watched decision looms on whether to give these cos the green light to sell to small investors access to crypto.”
Fox Business journalist and producer Eleanor Terrett followed up the post from Gasparino with a “double scoop,” saying, “Sources that were on the call tell me it was to do with making sure everyone is doing cash creates. The SEC asked issuers to remove all hints of in-kind redemptions from their filings.”
Multiple filers, including BlackRock, Fidelity, WisdomeTree, VanEck, and Invesco, have recently submitted amendments to their applications to include a cash-creation model for the ETFs, but some still included language regarding the possibility of in-kind creation and redemption, which the SEC reportedly opposes.
According to Terrett, the SEC sought assurances that asset managers would remove language related to in-kind creation and focus only on cash creation and redemption.
In-kind transactions would enable market makers to directly exchange Bitcoin for ETF shares, whereas the “cash create” route means that issuers will have to exchange Bitcoin for cash on every transaction, a more complicated and time-consuming process that requires the issuers to buy the Bitcoin instead of the broker-dealers.
From a tax perspective, in-kind purchases are not a taxable event, but selling Bitcoin for cash before the ETF purchase would be.
Bloomberg Intelligence ETF analyst Eric Balchunas added the following “interesting detail.”
“SEC [is] worried about money laundering via in-kind creations in a spot bitcoin ETF, this is why they so dug in on cash creates only (which is a much more closed system),” he said.
Balchunas also said that it wasn’t one large conference call between the SEC and every issuer, “but rather many calls to exchanges/issuers to reiterate that its Cash Creates or You Will Wait.”
Sources close to various firms remain optimistic that the SEC will approve multiple applications by January 10 – the last day that the SEC has to rule on the ARK 21Shares application, which was the first to be filed.
This outlook was reiterated by Bloomberg Intelligence ETF analyst James Seyffart, who tweeted, “We are still at 90% odds of approval by Jan 10 (window I'm watching is Jan 8-10).”
