The esteemed Securities and Exchange Commission, that venerable arbiter of financial propriety, is currently engaged in a delightful little charade involving the darling of the digital age: Bitcoin and Ethereum. Imagine, if you will, the SEC, a grand theatre of regulatory power, pondering the prospect of allowing Bitcoin and Ethereum exchange-traded funds (ETFs) to trade their wares, not with the humble dollar, but with actual cryptocurrency! A scandalous suggestion, indeed!
The esteemed Cboe BZX Exchange, a veritable playhouse of financial innovation, has dared to propose this daring notion, suggesting “in-kind” creations and redemptions for two ETFs, the aptly named ARK 21Shares Bitcoin ETF and the 21Shares Core Ethereum ETF.
Allowing such unorthodox trading practices would undoubtedly lead to improved after-tax performance for these ETFs, a fact which, we can all agree, is the true measure of success. Furthermore, such a move would likely encourage the participation of those august institutions, the very guardians of our financial system, to embrace the unruly realm of digital currencies. A most peculiar turn of events, indeed!
Authorized traders, those valiant knights of the financial markets, would, under this proposed scheme, create new ETF shares by exchanging either cash or a basket of the ETF’s underlying assets for a “block” of shares, a most peculiar transaction indeed. Redemptions, on the other hand, would simply reverse this process, a bit like a magician pulling a rabbit out of a hat, only far more mundane.
In-kind creations and redemptions, the SEC’s new dilemma, would apparently be more tax-efficient, a most desirable characteristic, we must agree. However, our esteemed regulators have not yet permitted such activities for spot cryptocurrency ETFs. A most curious delay, indeed!
A Flurry of Proposals, a Sea of Doubt
A recent flurry of proposals from the likes of Nasdaq, a most ambitious of exchanges, has further fueled the fire. They, too, have sought the SEC’s blessing for in-kind creations and redemptions for BlackRock’s iShares Bitcoin Trust, a veritable behemoth of an ETF, boasting a mind-boggling $57 billion in assets under management.
The ARK 21Shares Bitcoin ETF and the 21Shares Core Ethereum ETF, in comparison, are mere minnows, managing a paltry $5 billion and $20 million, respectively. A most amusing spectacle, indeed!
With the arrival of Donald Trump, a man of many talents, the winds of change seem to be blowing in the direction of crypto, a most welcome development, we must agree. He, a man of action, has promised to turn the US into the “world’s crypto capital,” a truly audacious ambition.
And so, the year 2024 saw a veritable deluge of proposals, with asset managers throwing their hats into the ring for ETFs holding altcoins, the digital equivalent of a motley crew of misfits. SOL, XRP, Litecoin, and a host of others, all eager to join the grand digital circus.
Even crypto index ETFs, those grand conglomerations of digital tokens, are awaiting the SEC’s approval. A most interesting development, indeed!
Bloomberg Intelligence, a most insightful oracle, predicts that these new crypto ETF proposals will likely receive a warm reception, a most optimistic outlook, indeed!
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2025-02-11 22:28