SEC’s Bitcoin ETF Update Deadline: Cash vs. In-Kind
As the cryptocurrency community eagerly anticipates the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States next month, a crucial deadline looms. The U.S. Securities and Exchange Commission (SEC) has mandated that spot Bitcoin ETF applicants submit final S-1 amendments by December 29, along with a requirement to establish an agreement with an authorized participant (AP) and finalize the preferred cash-create redemption model.
Today marks the deadline when the community is likely to discover which spot Bitcoin ETF filers, among the 14 applicants, could be part of the first wave of potential spot BTC ETF approvals expected in early January. Bloomberg’s senior ETF analyst, Eric Balchunas, revealed that many applicants have updated their filings to include the cash-create redemption model. As of December 22, seven applicants had adjusted their filings to cash-create, while the remaining seven included both cash-create and in-kind models in their registration statements.
Balchunas explained that the SEC’s preference for the cash model is aimed at minimizing the number of intermediaries with access to actual Bitcoin during the redemption and offering process. This is a departure from the common in-kind creation, where intermediaries provide actual assets like Bitcoin to create new ETF shares.
The SEC’s rationale is to create a more controlled system with fewer intermediaries handling actual Bitcoin, addressing concerns about broker-dealers’ involvement and potential money laundering risks. Balchunas noted that the SEC wanted to “close the loop a little more” and limit the number of entities interacting with Bitcoin.
In addition to adhering to the cash-create preference, ETF applicants are required to have a designated AP by today’s deadline. While agreements with APs may not be finalized for all applicants, trading giants Jane Street and Virtu Financial are anticipated to serve as APs for many, according to Balchunas. Some applicants, like ARK and 21Shares, did not specify the name of their AP in their recent spot Bitcoin ETF amendments filed on December 28, leaving some details to be confirmed in the final stages prior to launch.