In a recent series of revelations on the X platform, key figures in the financial and crypto spheres express concerns over the SEC’s impact on the efficiency of crypto exchange-traded Funds (ETFs). Notably, U.S. financial lawyer Scott Johnsson, venture capitalist Nic Carter, and the BitMEX exchange shed light on the potential repercussions of the SEC’s regulations on in-kind creation/redemption for digital assets.
SEC’s Regulatory Hurdles Threaten ETF Efficiency
The hype over the Bitcoin Spot ETF approval has fueled the market participants’ confidence lately, with global investors anticipating a significant inflow into the crypto market post-approval. Meanwhile, several market watchers and experts now expect the SEC to approve a Bitcoin Spot ETF as soon as in early January.
However, several market experts like Scott Johnsson, and Nic Carter, among others, have raised concerns on the upcoming Bitcoin Spot ETF, citing SEC’s hawkish stance. Renowned financial lawyer Scott Johnsson emphasizes a critical issue surrounding the SEC’s reluctance to approve amendments allowing in-kind creation or redemption for digital assets.
Meanwhile, he highlights the SEC’s skepticism about compliance, resulting in less investor protection despite its mandate. This regulatory stance, he notes, ushers in a novel but potentially less secure product, introducing new risks for investors.
In addition, venture capitalist and a prominent figure in the crypto world, Nic Carter also echoed the same sentiment. He emphasizes that in practical terms, the SEC’s stance implies that crypto ETFs will experience reduced efficiency as the process of creating and redeeming shares becomes more costly. It remains uncertain whether this will result in tracking errors or higher expense ratios, but the overall impact is an increased cost.
Source: X, Scott Johnsson
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BitMEX Warns of Diminished Crypto ETF Benefits
Adding to the discourse, crypto exchange BitMEX, co-founded by Arthur Hayes, articulates concerns over the SEC’s impact on the fundamental workings of crypto ETFs. Notably, BitMEX outlines the traditional mechanism where authorized participants (APs) play a pivotal role in ensuring ETF efficiency through in-kind creations and redemptions.
However, with the SEC favoring only cash transactions, BitMEX warns of a loss of crucial benefits, limiting competition and rendering the ETF structure less effective.
Meanwhile, as the crypto industry grapples with regulatory nuances, the apprehensions voiced by legal experts, venture capitalists, and major exchanges like BitMEX underscore the potential challenges ETFs may face. Investors and industry stakeholders are closely watching how these regulatory dynamics will shape the future of digital asset investment, raising questions about the SEC’s role in fostering or hindering innovation.
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