Fidelity pitches spot Bitcoin ETF model to SEC as regulatory talks advance

The U.S. Securities and Exchange Commission (SEC) disclosed on Dec. 7 that it met with Fidelity regarding the firm’s spot Bitcoin ETF application.

The securities regulator said that several members of its Division of Corporate Finance met with members of Fidelity on the day of the notice’s publication. Several members of CboeBZX also attended the meeting as well.

The focal point of the meeting was a proposed rule change, allowing CboeBZX to list and trade shares of Fidelity’s Wise Origin Bitcoin Trust.

Fidelity’s ETF model provides exposure to the cryptocurrency through a structure involving industry players with distinct roles. Authorized participants and broker-dealers interact with issuers and custodians to create and redeem ETF shares, facilitating market flow. Unregistered crypto affiliates hold and transfer the actual bitcoin tied to the ETF per creation/redemption orders. This intermediary setup allows market participants to gain price exposure without directly handling cryptocurrency.

SEC has met with other ETF firms

Recent reports suggest that talks between the SEC and applicants are now in advanced stages that concern “key technical details.” Unnamed sources, who asked to speak anonymously, told Reuters that the SEC is likely to approve the relevant ETF applications soon.

The SEC itself has disclosed meetings with other spot Bitcoin ETF applicants in recent weeks. The agency’s latest meeting with BlackRock also compared cash and in-kind models.

Statements from Bloomberg ETF analyst Erich Balchunas in November suggested that cash models may be preferable to in-kind models because some brokerages may find it difficult to carry out Bitcoin transactions under current U.S. regulations. However, more recent reports from Bloomberg ETF analyst James Seyffart suggest that some proposals will allow both options.

Balchunas and Seyffart also estimated a 90% chance that a spot Bitcoin ETF will be approved by January 2024.

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