Crypto Biz: SEC picks cash system for BTC ETF, Base gains traction, and more
The United States Securities and Exchange Commission has opted for a cash creation and redemption mechanism to address its concerns over market manipulation in the event it approves the launch of a spot Bitcoin (BTC) exchange-traded fund (ETF).
The use of cash creations means new shares of a spot Bitcoin ETF will be only created or redeemed through cash transactions, unlike traditional ETFs based on stocks and commodities, which typically use an in-kind model where market participants handle the underlying assets directly.
Initially proposed by Hashdex — one of the asset managers seeking regulatory approval for the investment vehicle — the mechanism was developed to prevent intraday price manipulation, according to Hashdex’s original filing from August.
At the regulator’s request, other asset managers — including BlackRock, ARK Invest and Grayscale — have incorporated the mechanism in recent weeks.
Some speculators believe the SEC’s next move could target the need for a regulated market of significant size, likely requiring applicants to include the Chicago Mercantile Exchange for physical transactions. However, this may not be the case.
At a recent meeting with applicants, the SEC set a deadline of Dec. 29 for filing final S-1 amendments, warning that applicants who missed the deadline would not be considered for the January batch of potential approvals.
The latest hurdle removed that was in the way of an approval involved the resignation of Digital Currency Group’s Barry Silbert — described in more detail below. This week’s Crypto Biz also explores the Base network’s consistent growth, MicroStrategy’s stock surge, and more.
Grayscale refiles Bitcoin ETF application as Barry Silbert departs
Crypto asset manager Grayscale lodged an amended S-3 filing with the United States securities regulator on the same day Silbert — CEO of parent company Digital Currency Group — announced his resignation from Grayscale’s board of directors. Some crypto market commentators speculate that Silbert’s departure could significantly increase the odds that Grayscale will successfully convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF — an endeavor currently awaiting a decision from the Securities and Exchange Commission.
Barry's resignation was @Sonnenshein's X-Mas gift.— Ram Ahluwalia CFA, Lumida (@ramahluwalia) December 26, 2023
What to make of @bsilbert resigning from Grayscale?
Grayscale has had 9 meetings with the SEC per the table below (h/t @JSeyff)
Today, there are only allegations against DCG which have not been resolved in a court of law.… https://t.co/d7tZFFAOoU pic.twitter.com/NjjdWq0F3a
Base network sees steady growth, surpasses $735 million in TVL
Coinbase’s Base network is showing consistent growth, although the rate has slowed since its initial surge. On Dec. 24, Base’s total value locked (TVL) reached nearly $735 million, marking a 4% increase over the previous week. Over 6.97 million transactions were completed on the network over the previous 30 days, with a daily speed of 3.45 transactions per second.
Chinese Web3 VC to launch $10 billion accelerator fund: Report
Chinese venture capital firm GBA Capital announced a $10 billion pledge to establish a Web3 fund. According to local news reports, the fund will invest in startups focusing on virtual reality, the metaverse and nonfungible tokens, seeking to transform the Guangdong-Hong Kong-Macao economic area into the world’s “meta-asset capital.” Since the beginning of the year, the region has been experiencing an influx of Web3 startups and overseas relocations. GBA Capital was established by China Europe International Financial Group in Hong Kong.
MicroStrategy’s stock surges 350% in 2023 on back of Bitcoin ETF hype
MicroStrategy has seen its stock price climb over 350% in 2023, primarily due to expectations surrounding the approval of a spot Bitcoin ETF in the United States. The company’s massive exposure to Bitcoin is backing its stock performance. MicroStrategy and its subsidiaries hold 189,150 BTC, representing a combined purchase price of approximately $5.9 billion and an average purchase price of $31,168 per coin. Its exposure to the cryptocurrency is leading some analysts to label its stock as “essentially a leveraged Bitcoin ETF.”
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