The U.S. Securities and Exchange Commission (SEC) has signaled that it is open to approving spot bitcoin exchange-traded funds (ETFs), but only under certain conditions. In a recent letter to the industry, the SEC outlined the requirements that spot bitcoin ETFs must meet in order to obtain regulatory approval.
One of the key requirements is that spot bitcoin ETFs must have clear and prominent disclosures regarding the creation and redemption process, which must be cash-only. This means that the ETFs cannot use bitcoin futures or other derivatives to create or redeem shares but must rely on physical delivery of bitcoins.
The SEC also stated that spot bitcoin ETFs must have a signed agreement with an authorized participant (AP), which is a market maker that facilitates the creation and redemption of ETF shares.
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The SEC’s letter is a response to several applications for spot bitcoin ETFs that have been filed in recent months, as the demand for bitcoin exposure among investors has increased. The SEC has already approved several bitcoin futures ETFs, which track the price of bitcoin futures contracts traded on regulated exchanges, but has not yet approved any spot bitcoin ETFs, which would track the actual price of bitcoins.
The SEC’s letter indicates that the regulator is concerned about the potential risks and challenges associated with spot bitcoin ETFs, such as market manipulation, custody, valuation, liquidity, and arbitrage.
The SEC also noted that spot bitcoin ETFs may face additional regulatory hurdles from other agencies, such as the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC).
The SEC’s letter does not guarantee that any spot bitcoin ETF will be approved, but it does provide some clarity and guidance for the industry. The SEC also invited further feedback and engagement from interested parties on the topic of spot bitcoin ETFs. The letter may encourage more applicants to file for spot bitcoin ETFs, or prompt existing applicants to revise their proposals to align with the SEC’s expectations.
BlackRock names JPMorgan as an authorized participant for its Spot Bitcoin?ETF
BlackRock, the world’s largest asset manager, has announced that JPMorgan Chase & Co. will be one of the authorized participants for its Spot Bitcoin?ETF, which is expected to launch in early 2024. This means that JPMorgan will be able to create and redeem shares of the ETF, as well as provide liquidity and market making services for the product.
The Spot Bitcoin?ETF is a novel type of exchange-traded fund that will track the price of bitcoin directly, rather than relying on futures contracts or other derivatives. The ETF will hold physical bitcoins in a segregated custodial account and will use a transparent and auditable process to verify the ownership and integrity of the underlying assets.
The ETF will also have a low expense ratio of 0.5%, making it an attractive option for investors who want to gain exposure to the cryptocurrency market without the hassle and risk of buying and storing bitcoins themselves.
BlackRock’s decision to partner with JPMorgan is a significant endorsement of the Spot Bitcoin?ETF, as JPMorgan is one of the most influential and respected financial institutions in the world. JPMorgan has been gradually warming up to the crypto space, after initially being skeptical and dismissive of it.
In 2017, JPMorgan CEO Jamie Dimon famously called bitcoin a “fraud” and said he would fire any employee who traded it. However, since then, Dimon has softened his stance and admitted that he was wrong about bitcoin.
In 2020, JPMorgan launched its own digital currency, JPM Coin, to facilitate cross-border payments and settlements. In 2021, JPMorgan started offering bitcoin exposure to its wealthy clients through various funds and trusts. And in 2022, JPMorgan became the first major U.S. bank to offer bitcoin trading to its retail customers through its mobile app.
By becoming an authorized participant for BlackRock’s Spot Bitcoin?ETF, JPMorgan is signaling its confidence and commitment to the crypto industry, as well as its recognition of the growing demand and acceptance of bitcoin among investors of all types and sizes. The Spot Bitcoin?ETF is expected to be a game-changer for the crypto market, as it will provide an easy and regulated way for mainstream investors to access bitcoin, potentially boosting its adoption, liquidity and price.
The ETF is also likely to spur more innovation and competition in the crypto space, as other asset managers and financial institutions will follow BlackRock’s lead and launch their own spot or futures-based bitcoin ETFs.
The Spot Bitcoin?ETF is still awaiting approval from the U.S. Securities and Exchange Commission (SEC), which has been notoriously cautious and reluctant to greenlight any bitcoin-related products. However, BlackRock is optimistic that it will receive the SEC’s blessing soon, as it has been working closely with the regulator to address its concerns and meet its standards.
BlackRock is confident that its Spot Bitcoin?ETF will offer investors a safe, secure and transparent way to invest in bitcoin, while also contributing to the maturation and legitimacy of the crypto market.