The U.S. Securities and Exchange Commission (SEC) is gearing up for what could be a landmark regulatory event in the $1.6 trillion cryptocurrency market: The potential approval of a “spot” Bitcoin ETF next year.
On Thursday afternoon, SEC staff held separate phone conference calls with potential candidates for the spot Bitcoin ETF, according to FOX Business. The talks covered some of the details of the application process and gave a clear message about how ETFs should be structured.
According to meeting details, the SEC will only consider applications that will structure an ETF in a way that allows issuers to purchase the product using cash, not Bitcoin. Similarly, the ETF will be repaid in cash only. Any mention of “in-kind” purchases or refunds will need to be removed from the application.
The cash-only system is an important requirement for the SEC and has sparked controversy among fund managers seeking approval, according to interviews. Most other ETFs allow in-kind purchases and redemptions as well as cash. However, the SEC believes that Bitcoin ETFs present additional regulatory challenges not found in such standard offerings. The institution requires cash only due to potential abuse concerns regarding the use of crypto for purchases and refunds.
CoinRoutes co-CEO David Weisberger commented on the situation:
“It is clear from all subsequent S-1 filings that the Commission directed the changes to the cash system, apparently as a final hurdle before transition. “While the timing is uncertain, it seems likely that it will occur before the next deadline on January 10.”
Still, based on conversations with SEC staff, asset managers are confident of a positive decision from the SEC on or before January 10.
*This is not investment advice.