The U.S. Securities and Exchange Commission (SEC) has reportedly conducted a series of targeted conference calls with all filers of spot Bitcoin Exchange-Traded Funds (ETFs). Fox Business Network’s Senior Correspondent, Charles Gasparino, described these engagements as a “rare” occurrence in regulatory actions. The primary focus of these discussions was to persuade issuers to modify their Bitcoin ETF redemption models.
Emphasis on the “Cash Creates” Model
SCOOP: @SECGov is having what’s described as a rare joint conference call with prospective “spot” #BTC ETF filers, as its closely watched decision looms on whether to give these cos the green light to sell to small investors access to crypto. @FoxBusiness reported yesterday the…
— Charles Gasparino (@CGasparino) December 21, 2023
Eleanor Terrett, a Fox Business Network journalist, highlighted the SEC’s specific emphasis during these meetings: the “cash creates” model. This model requires issuers to eliminate the option of “in-kind redemptions” in their filings, effectively mandating the conversion of Bitcoin to cash before trading ETF shares. This approach is consistent with the SEC’s policy, which prohibits broker-dealers from engaging directly in Bitcoin trading. By insisting on cash conversions, the SEC aims to minimize the risks associated with direct Bitcoin transactions, especially in potentially approving these ETFs.
Clarification of Conference Call Details
🚨DOUBLE SCOOP: Sources that were on the call tell me it was to do with making sure everyone is doing cash creates. The @SECGov asked issuers to remove all hints of in-kind redemptions from their filings. https://t.co/hEjXBAHLpY
— Eleanor Terrett (@EleanorTerrett) December 21, 2023
Contrary to earlier reports suggesting a joint conference, Bloomberg’s senior analyst, Eric Balchunas, clarified that these were multiple separate calls to exchanges and issuers, specifically focusing on the “Cash Creates” model. There are hints that the SEC might be encouraging issuers to adopt a more stringent model, possibly the Prime Execution Agent model, wherein a third party oversees Bitcoin transactions for the ETF.
Implications for ETF Filers and the Crypto Market
The SEC’s decision on multiple ETF filings is expected by January 10. The focus on the Prime Execution Agent model has become a central topic of discussion. Issuers like BlackRock may have to revise their filings to align with these new guidelines. This regulatory move signals the SEC’s shift towards a more interactive and cautious approach regarding cryptocurrencies.
As the situation unfolds, the implications for retail investors and the broader cryptocurrency market remain significant. Coinpedia will continue to provide the latest updates on this evolving story.
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