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US Securities and Exchange Commission Engages with Exchanges on Spot Bitcoin ETF Applications

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Bloomberg Analyst Reveals SEC's Instructions for Bitcoin ETF Applicants

The US Securities and Exchange Commission (SEC) has been in discussions with exchanges regarding spot Bitcoin exchange-traded fund (ETF) applications, according to a Bloomberg analyst. Eric Balchunas reported that the SEC is advising applicants to handle funds in a specific way, favoring "cash creates" over "in-kind" methods. This unexpected move by the SEC is seen as a positive sign for the potential approval of a spot Bitcoin ETF.

Understanding "Cash Create" and "In-Kind" Methods

"Cash create" and "in-kind" are the two main methods for creating and redeeming exchange-traded funds. In a "cash create" situation, authorized participants exchange cash equivalent to the shares they want, while "in-kind" allows authorized participants to provide an ETF with a basket of securities or assets replicating the ETF’s underlying asset.

Advantages of Cash Creates

Balchunas explains that cash creates offer fewer limitations to broker-dealers, as they cannot deal in Bitcoin directly. By using cash creates, issuers can transact in Bitcoin without broker-dealers having to rely on unregistered subsidiaries or third-party firms.

Potential Approval of Spot Bitcoin ETF

Despite the recent delays on some spot Bitcoin ETF applications, the SEC's engagement with exchanges and preference for cash creates is seen as a positive development. Balchunas believes that this indicates the SEC has a path forward that they are comfortable with, although it does not change the estimated 90% odds of approval.

Delays on ETF Filings from Global X and Franklin

The SEC has deferred making a decision on ETF filings from Global X and Franklin. The commission is expecting public comments on the proposals, with a comment period of at least 35 days for Global X and about 21 days for Franklin.

Bitcoin Price Update

As investors and enthusiasts anticipate the approval of the first spot Bitcoin ETF in the United States, the price of Bitcoin has been on the rise. Currently valued at $36,337, the premier cryptocurrency has experienced a slight 0.2% price decline in the past day.

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