The Securities and Exchange Commission (SEC) appears to be slowly warming up to the idea of approving a spot Bitcoin exchange-traded fund (ETF). This comes after recent reports that the SEC held yet another meeting with BlackRock to discuss the asset management giant’s spot Bitcoin ETF application.
SEC Met with Major Crypto Players Multiple Times This Month
According to a CoinDesk report, executives from BlackRock’s Global Aladdin business, crypto exchange Coinbase, and Nasdaq met with SEC officials on December 7th to discuss a Bitcoin spot ETF.
This meeting marks the 24th gathering the SEC has held regarding spot Bitcoin ETF applications just this year alone, as noted by Coingape. The frequent meetings signal that the SEC is heavily considering opening up the doors for a spot crypto ETF in 2023.
In BlackRock’s latest meeting, the parties reportedly discussed the possibility of requiring cash creations and redemptions for its proposed Bitcoin ETF instead of allowing in-kind transfers.
Cash-Only Model Could Ease SEC’s Money Laundering Concerns
Switching to an all-cash model is seen as one way to ease some of the SEC’s apprehensions around a crypto ETF. As FXStreet notes, the SEC is worried that in-kind ETFs could open the door to money laundering if investors use crypto obtained through illegal means.
A cash-only ETF would prevent this since investors would need to provide cash upfront before getting ETF shares. While more operationally complex, the cash model gives the SEC better oversight and could push an approval across the finish line.
BlackRock’s willingness to adapt its ETF application also signals that the asset manager believes it now has a credible path to getting SEC clearance after years of rejections.
Growing Clamor for Crypto Access Driving ETF Momentum
Pressure has been mounting on the SEC amid growing calls from investors for access to crypto through regulated investment vehicles.
In a recent Bloomberg interview, SEC Chairman Gary Gensler stated that he has “been trying to get public input” on ETF applications. His openness to feedback contrasts with his previously rigid anti-crypto stance and hints that the SEC could be more receptive to finally approving a spot ETF.
Driving much of the demand for crypto ETFs is swelling interest from financial advisors. A Needham survey found that nearly half of advisors want access to crypto for clients. However, most lack the operational capabilities to directly hold crypto safely and thus see an ETF as the ideal solution.
Major crypto leaders are also strongly advocating for a spot Bitcoin ETF to open the floodgates to institutional investment.
Massive Capital Could Flow into Crypto Market with ETF Approval
Speaking on approval prospects, Grayscale CEO Michael Sonnenshein stated that the SEC approving a spot Bitcoin fund could lead over “$30 trillion of advised wealth assets” to enter the crypto ecosystem. Sonnenshein added that an ETF is critical for enabling trillions worth of retirement and pension money to get exposure to digital assets.
Other experts share Sonnenhein’s belief that a spot crypto ETF could kick off an enormous inflow of funds.
“An approval would ultimately lead to significant inflows from Retail and Institutional investors that were previously restricted from accessing the digital assets market,” noted Shidan Gouran, CEO of crypto advisory Gulf Pearl.
All signs point to the SEC being deep in deliberations around finally letting a spot crypto ETF through. With Grayscale converting its Bitcoin Trust (GBTC) into an ETF this year and heavyweights like BlackRock applying pressure, the walls seem to be closing in on the SEC’s stringent opposition.
Key Takeaways:
- SEC has ramped up meetings with BlackRock, Coinbase and others to discuss spot Bitcoin ETF
- BlackRock altered its application to feature cash creations/redemptions to ease SEC concerns
- Massive pent-up demand from investors and advisors for crypto ETF exposure
- SEC warming up to idea but strict standards still apply around custody and fraud prevention
- Expert predictions of multi-trillion dollar inflows if SEC greenlights a spot Bitcoin ETF
The SEC concluding its years-long blockade on spot crypto ETFs would mark a monumental shift for both the ETF and crypto spheres. With the regulatory gates unlocked, prepare for an unprecedented wave of institutional capital to come barreling into Bitcoin and other digital assets. The crypto rocket ship may just be clearing the launch pad for liftoff.
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