Key figures in finance and cryptocurrency sectors are voicing concerns over the U.S. Securities and Exchange Commission’s (SEC) impact on the efficiency of crypto-based spot exchange-traded funds (ETFs). Notably, U.S. finance attorney Scott Johnsson, venture capitalist Nic Carter, and the BitMEX exchange have shed light on the potential implications of the SEC’s in-kind creation/redemption regulations for cryptocurrencies.
The excitement surrounding the approval of a spot Bitcoin ETF has recently boosted market participants’ confidence, with global investors anticipating significant institutional involvement in the crypto market post-approval. Meanwhile, many market observers and experts are expecting the SEC to approve a spot Bitcoin ETF by early January 2024.
However, market experts like Scott Johnsson and Nic Carter have expressed concerns about the upcoming spot Bitcoin ETF, citing the SEC’s hawkish stance. Johnsson highlighted the critical issue surrounding the SEC’s reluctance to approve changes that allow in-kind creation or redemption for cryptocurrencies, noting that the SEC’s skepticism about compliance has led to less investor protection despite its authority.
Venture capitalist Nic Carter agrees with Johnsson, stating that the SEC’s attitude could reduce the efficiency of crypto ETFs as the share creation and redemption process becomes more costly. According to Johnsson, it’s unclear whether this will lead to tracking errors or higher expense ratios, but the overall effect corresponds to rising costs.
BitMEX, co-founded by industry leader Arthur Hayes, has made a notable statement expressing concerns about the SEC’s impact on the fundamental operations of crypto-based spot ETFs. BitMEX outlined the traditional mechanism where authorized participants (APs) play a crucial role in maintaining ETF efficiency through in-kind creations and redemptions.
While the crypto world grapples with specific regulatory nuances, the concerns raised by legal experts, venture capitalists, and major crypto exchanges like BitMEX highlight the potential challenges ETFs may face. Investors and industry stakeholders are closely monitoring how these regulatory dynamics will shape the future of crypto investments and are questioning the SEC’s role in either fostering innovation or creating obstacles.
