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Big money management firms expect the Securities and Exchange Commission (SEC) to grant approval for the first “spot” Bitcoin (BTC) exchange-traded fund (ETF) in early January. 

According to sources close to these firms, recent guidance from SEC officials suggest a green light will likely come by January 10, Fox Business reported Thursday. 

The SEC’s final deadline to approve or deny the application for a spot Bitcoin ETF is January 10, 2024, submitted by Ark Investment Management in collaboration with 21Shares.

Approximately a dozen companies, including renowned Wall Street asset managers like BlackRock and Fidelity, have applied for a spot Bitcoin ETF.

Executives at these firms believe that the SEC might approve multiple applications simultaneously. 

The approval of a spot Bitcoin ETF would provide retail investors with increased exposure to the largest cryptocurrency at a lower cost compared to Bitcoin ETFs already approved and based on futures markets. 

Furthermore, investors can gain access to Bitcoin through regulated money management firms, bypassing unregulated exchanges, as these ETFs would be traded on the New York Stock Exchange and Nasdaq.

SEC Insists on Cash Redemptions

In meetings with major money management firms, the SEC has insisted that applicants use cash to purchase shares of the ETF rather than the underlying asset, Bitcoin. 

This marks a departure from the conventional “in-kind” transactions, where market makers can exchange Bitcoin for ETF shares.

Cash redemption creates a more complex process, as ETF issuers will have to exchange Bitcoin for cash in each transaction, thus buying the Bitcoin themselves instead of relying on broker-dealers.

Another drawback of cash creation is that investors would lose an important tax advantage. 

In-kind purchases are not subject to taxation, but selling Bitcoin for cash before purchasing the ETF would incur taxable events.

Notably, some spot Bitcoin ETF applicants, such as Grayscale, are reluctant to abandon the pursuit of in-kind creations. 

In a recent meeting with the SEC, Grayscale argued that offering both in-kind and cash creations and redemptions would be in the best interest of investors, fostering a more efficient market structure.

BlackRock Has Made Spot Bitcoin ETF a Priority

BlackRock, the world’s largest money manager with over $9 trillion in assets under management, has made obtaining SEC approval for its proposed Bitcoin ETF a top priority. 

As reported, CEO Larry Fink has referred to Bitcoin as an international asset and a store of value comparable to gold. 

He said that he believes this move would democratize the cryptocurrency market and make it more accessible for retail investors.

“What we’re trying to do with crypto is make it more democratized with all of crypto and making it much cheaper for investors,” Fink said during an interview on The Claman Countdown. 

BlackRock has engaged in five meetings with the SEC regarding its spot Bitcoin ETF application, with the most recent occurring on Tuesday. 

The SEC has held approximately 24 meetings with various ETF applicants, signaling its commitment to bringing these products to market in the new year.

While the possibility remains that the SEC may deny all applications, industry officials consider it unlikely. 

Specifically, the US Court of Appeals for the District of Columbia Circuit has ruled in favor of Grayscale, ordering the SEC to set aside its earlier rejection of Grayscale’s application and reopen the review process.

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