In the United States, spot bitcoin exchange-traded funds have yet to be approved, but analysts expect approvals to come sooner rather than later. One of the critical reasons for that optimism is the involvement of financial giants like JPMorgan Chase and Goldman Sachs. Both firms are in talks to serve as authorized participants for the spot bitcoin ETFs that BlackRock (BLK.N) and Grayscale are looking to launch, CoinDesk reported on Wednesday. Authorized participants play a critical role in the operation of ETFs, as they facilitate the creation and redemption of shares by exchanging them for the underlying assets, such as Bitcoin.
Grayscale, which manages the $26 billion Grayscale Bitcoin Trust, is transforming its fund into an ETF format to increase access to cryptocurrencies for mainstream investors. The firm has already named APs Jane Street and Cantor Fitzgerald in its amended SEC filing.
A source familiar with the matter said that the ETF would track the market price of the underlying crypto asset and give investors exposure to it without having to buy the coin itself. The source also said crypto-related instruments, including futures contracts, would back the ETF. However, it is still being determined whether the ETF will include a futures contract that tracks the spot price of BTC, as the top US markets regulator has expressed concern about market manipulation and the inability to protect investors in such products in the past.
The ETF’s upcoming launch came amid a rally for cryptocurrencies, as fears surrounding an SEC rejection were eased, and many investors viewed a potential ETF approval as a “buy the news” event. The market is awaiting the SEC’s decision on 14 different Bitcoin ETF applications, including ones from BlackRock, VanEck, Bitwise, and Fidelity Investments.
The ETFs are being reviewed by the SEC’s ETF review staff and a team of SEC Commissioners. The agency has signaled it is open to approving Bitcoin ETFs tied to the underlying asset’s spot prices, in contrast to existing Bitcoin and ether ETFs based on derivatives. The approval of these ETFs will help bring more institutional money to the cryptocurrency industry, which has been starved for institutional capital in recent years. It will also boost the global cryptocurrency market by allowing it to gain wider mainstream acceptance. The fact that both central investment banks are in advanced discussions to participate in this initiative is another sign of the increasing mainstream interest in cryptocurrencies. However, the ETFs’ pending approval is not guaranteed, as previous attempts have been rejected by the SEC on concerns about market manipulation and lack of liquidity in their underlying assets.