Let's address the topic the crypto industry is obsessed with: I believe there is a 98% chance that a spot bitcoin ETF will be approved in the U.S. by Jan. 10.
Recent developments support that. The Securities and Exchange Commission has been meeting with potential issuers of these ETFs, even during the busy holiday season, to straighten up the final details, structure the creation and redemption procedure and guide issuers to incorporate the latest changes into their revised S-1 filings. BlackRock just filed its fourth amendment to its application with the SEC on Dec. 23 and is expecting to seed its bitcoin ETF with $10 million on Jan. 3.
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Of course, seeding the ETF shell does not necessarily mean launch.
But Fox Business reported that final amendments to all spot bitcoin ETF applications must be done by Dec. 29: “The applications that are fully furnished and filed by Friday will be considered in the first wave.”
The following indicates the SEC timetable of 13 prospective issuers:
Source: Bloomberg
The SEC has requested that issuers have their authorized participant agreement – describing who will play the key role of creating and redeeming ETF shares – available in the coming days. Authorized participants are a central part of the ETF business, but this job will be a particularly tough one, with bitcoin ETF APs needing basic knowledge of digital assets and the ability to provide safekeeping and custody, conduct due diligence for anti-money-laundering and know-your-customer purposes, ensure compliance with sanctions regulations, deal and place crypto asset orders on behalf of clients, and so on. Not many traditional brokerages are well-equipped to do this.
No authorized participants yet. Source: Bloomberg
It is obvious that the SEC wanted the ETF issuers to have at least conducted the preliminary chat with the market participants and sort things out – e.g. the assigned roles, operation flows, AP agreements – before formally granting the green light. For a brand new and groundbreaking ETF like this, it takes more than one mega-fund issuer to succeed; it is about the whole digital asset ecosystem and reciprocal teamwork. Wall Street is lucky to have Coinbase, which already white labeled a significant portion of their crypto user database from 2013 and its KYCed wallet addresses.
Meanwhile, in Hong Kong, the Securities & Futures Commission on the other hand is progressing with spot bitcoin ETFs in a more logical and conventional order. First, the SFC issued virtual asset management licenses, allowing fund managers with crypto experience to launch long-only private funds for high-net-worth individuals and institutions. Second, they issued a virtual asset exchange license on crypto trading platforms, letting retail clients to buy or sell bitcoin and ether.
Then, they offered traditional brokerage firms with qualified crypto backgrounds to upgrade the business scope to virtual assets as well, meaning those brokers can also provide crypto-related dealing and placing orders on behalf of their clients. This proper sequence of licensing provides the ground rules and makes a spot bitcoin ETF likely in 2024.
Bitcoin’s strength in 2024 should be well supported by themes like spot ETFs, the halving and a fall in real rates, according to Coinbase Institutional. The three combined factors will establish the basic fundamentals of 2024 and will push bitcoin and the crypto industry's entire market capitalization to all-time highs.