Major companies in the market such as BlackRock and ARK Invest have amended their S-1 registration statements to comply with the requirements imposed by the U.S. Securities and Exchange Commission. Regarding the planned spot Bitcoin exchange-traded fund (ETF), this update includes a significant move towards a cash redemption approach.
This strategic decision, symbolized by the submission of the amendment on December 18, 2023, symbolizes the acceptance of a cash generation and repurchase model beyond the spot repurchase pursued in the past. Redemption in kind typically involves a transaction that does not require a monetary exchange, such as using Bitcoin (BTC) directly. This adjustment is in accordance with the standards set by the U.S. Securities and Exchange Commission (SEC).
The ARK 21Shares Bitcoin ETF is specifically mentioned in ARK Invest’s registration statement, which highlights the company’s shift to only permit cash creation and redemption. As far as future spot contracts are concerned, the statement gives them an opportunity. However, this only applies if regulatory clearance is received. In a similar vein, BlackRock echoed this position and highlighted the possibility of spot trading, but this would depend on receiving approval from regulators.
Now that the SEC is insisting on a “cash-only” strategy, authorized participants in these exchange-traded funds (ETFs) must supply cash to buy more shares. Unlike “spot” techniques, which allow investors to exchange assets monitored by the ETF (in this case Bitcoin) directly for ETF shares, this approach takes a different approach. The cash-only strategy seeks to provide better transparency about the origins of Bitcoin, serving as the basis for exchange-traded funds (ETFs) that supposedly acquire Bitcoin from reputable exchanges.
The industry’s response is cold. Bloomberg ETF analyst Eric Balchunas added that ARK and its partner 21Shares initially rejected the cash-generating approach. In fact, they even designed an alternative mechanism for redemption in kind. Their final compliance demonstrates the SEC’s tough stance on the topic, which analysts suggest could pave the way for a possible Bitcoin exchange-traded fund (ETF) approval as early as January.
This new move is part of a larger trend in which companies issuing exchange-traded funds (ETFs), such as global ETF provider WisdomTree, must comply with the SEC’s preference for cash redemptions. This strategic move between large firms such as BlackRock and ARK Invest represents a substantial adaptation to regulatory restrictions and could signal the start of a new phase in the development of Bitcoin exchange-traded funds by bringing new levels of support to the market.
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