The U.S. Securities and Exchange Commission (SEC) has set a significant deadline for spot Bitcoin ETF applicants, requiring them to adopt a cash-create redemption model and finalize their S-1 amendments. This requirement reflects the SEC’s preference for a model where ETF issuers receive cash from intermediaries, which is then used to buy Bitcoin, rather than the in-kind model where intermediaries transfer actual Bitcoin to the ETF issuers.
Bloomberg ETF analyst Eric Balchunas notes that the cash-create model is likely to be enforced by regulators for Bitcoin ETFs. This model may have substantial implications for the cost of managing each fund and the fees passed down to customers. Additionally, the cash-create model could result in higher taxes, as it involves cash transactions as opposed to in-kind trades, which do not involve cash exchanges. ETF issuers would be subject to capital gains taxes whenever they sell their fund’s Bitcoin, potentially forcing ETF holders to recognize gains prematurely.
The Grayscale Bitcoin Trust (GBTC) might be most affected by this change, as it has been holding clients' Bitcoin for years at much lower prices. The move to a cash-create model is seen as a ‘done deal’ based on the updated filings from various ETF applicants.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.
