Representatives from at least seven companies aiming to launch exchange-traded funds (ETFs) tied to spot Bitcoin (BTC) have engaged in discussions with officials from the Securities and Exchange Commission (SEC). According to a Reuters report, information from public memos and sources familiar with the matter revealed that the SEC directed at least two applicants to submit final changes to their proposals by the end of the upcoming week.
Prominent participants in these meetings included representatives from BlackRock, Grayscale Investments, ARK Investments, and 21 Shares. Notably, the SEC is expected to make a decision on the joint proposal presented by ARK and 21 Shares by January 10. There is widespread anticipation that the SEC may approve multiple applications simultaneously in the days leading up to this deadline.
The December 29 Deadline
Executives from ARK and 21 Shares who participated in the discussions with the SEC disclosed to Reuters that the regulatory body has set a deadline of December 29 for the final updates to their filings. The SEC emphasized that applicants failing to meet this deadline would not be included in the initial round of potential spot Bitcoin ETF approvals expected in early January.
Fox Business was the first to report on the December 29 deadline. Memos from the meetings revealed the presence of representatives from the exchanges where the new products might be traded, such as Nasdaq and Cboe, along with attorneys representing the applicants. This suggests a comprehensive and collaborative effort involving various stakeholders in the ETF approval process.
Over the years, the SEC has consistently rejected numerous applications for spot Bitcoin ETFs, citing concerns related to potential market manipulation in the cryptocurrency market. Presently, the agency has exclusively approved cryptocurrency ETFs tied to Bitcoin and Ethereum (ETH) futures contracts traded on the Chicago Mercantile Exchange.
Recent developments indicate a shifting trend among regulators, signaling a growing willingness to approve some of the 13 proposed spot Bitcoin ETFs. A notable catalyst in this evolving landscape was a federal appeals court ruling in August, which determined that the SEC had made an error in rejecting Grayscale’s proposal to convert its trust into an ETF. This ruling has contributed to a reevaluation of the regulatory approach to cryptocurrency ETFs, potentially opening the door for broader approval.
SEC Could Accept ETF Applications by Early 2024
According to the two executives who participated in the SEC meetings, the agency has indicated that it might grant approval in the first few business days of 2024. The regulators would communicate the “effective” date directly to the issuers, allowing each proposed ETF to be launched accordingly.
When queried for comment, an SEC spokesperson mentioned that the agency doesn’t provide individual filing-related comments.
In recent days, several issuers have made technical amendments to their ETF proposals. Notably, both BlackRock and ARK updated their filings earlier this week to accommodate cash redemptions, a modification requested by regulators, according to individuals familiar with the matter. This suggests ongoing collaboration between the issuers and regulators to meet the necessary requirements for potential spot Bitcoin ETF approvals.
Final updates to the proposals are anticipated to encompass detailed fee information. Among the applicants, ARK and 21 Shares are notable for being the only ones that have disclosed the proposed fee for their joint ETF, set at 0.80%.
In addition to fee details, the final changes will incorporate information about the initial capitalization, often referred to as “seeding,” of the new ETFs. Sources involved in the discussions suggest that the initial seeding amounts are expected to be relatively small but are likely to experience significant growth once the ETFs commence trading. The capital provided during the seeding process is crucial for market makers to ensure the initial market for the new ETFs remains liquid and efficient.
