The deadline for the potential launch of U.S. exchange-traded funds (ETFs) is significant today, particularly for spot Bitcoin ETFs, as it marks a crucial moment for applicants. The U.S. Securities and Exchange Commission (SEC) mandated spot Bitcoin ETF applicants to finalize S-1 amendments by December 29. The SEC urged them to establish agreements with authorized participants (APs) and address cash creation redemptions for their preferred model.
With this deadline, the community anticipates learning which among the 14 spot Bitcoin ETF applicants could potentially secure approval in the initial wave, expected predominantly in early January. Analysts observed that many ETF applicants updated their filings to include cash-creating redemption models. As of December 22, seven applicants had rectified their applications exclusively for cash creation, while seven others retained both cash creation and in-kind methods in their registration statements.
ETF experts speculate that the SEC’s preference for a cash model in spot Bitcoin ETFs aims to reduce the number of intermediaries accessing actual bitcoins during issuance and redemption. Eric Balchunas, a senior ETF analyst at Bloomberg, indicated that around 90% of ETFs usually involve physical creation, where intermediaries furnish funds to companies like BlackRock using tangible assets like Bitcoin.
Balchunas suggested that the SEC is concerned about broker-dealers as intermediaries gaining exposure to Bitcoin. The SEC’s aim appears to be creating a more closed system with fewer intermediaries handling actual Bitcoin. As of the December 29 deadline, ETF applicants are also required to secure confirmed AP agreements.
Regarding AP agreements, Balchunas mentioned that several deals were pending signature, and major trading firm giants like Jane Street and Virtu Financial might potentially become APs for multiple ETF applicants. Yet, in the most recent spot Bitcoin ETF amendment filed by ARK and 21Shares on December 28, specific details about the AP were not provided, leaving uncertainty about the finalized deals.
