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Goldman Sachs Gets Involved as Spot Bitcoin ETF Speculation Heats Up

Published January 4, 2024 12:12 PM

By Teuta Franjkovic

Goldman Sachs is allegedly in talks with JPMorgan and Grayscale about possible Bitcoin ETF | Credit: Omar Marques/SOPA Images/LightRocket via Getty Images

Key Takeaways

Grayscale is in talks with JPMorgan and Goldman Sachs, asking them to be authorized participants for its proposed Bitcoin ETF.
Goldman Sachs has expressed support for a Bitcoin ETF approval.
Analysts are optimistic about the approval of a spot Bitcoin ETF in the US.

Grayscale Investments, a cryptocurrency asset management firm, is reportedly in discussions with major financial institutions, including JPMorgan and Goldman Sachs, regarding its involvement in Grayscale’s planned Bitcoin exchange-traded fund.

According to a source familiar with the situation, these firms could, potentially, serve as authorized participants.

Grayscale, JPMorgan and Goldman Sachs did not immediately respond to a request for comment.

Securing Key Role in Bitcoin ETF

Authorized participants are entities capable of creating and redeeming shares of the fund. They play a vital role in the functioning of exchange-traded funds (ETFs), as they are responsible for ensuring that the ETF’s share price accurately reflects the value of the fund’s underlying assets. They also act as a significant source of liquidity for the ETF. In the context of proposed Bitcoin ETFs, BlackRock has already appointed JPMorgan Securities and Jane Street Capital as authorized participants for its Bitcoin ETF.

It took over ten years, but we’re finally on the verge of having spot bitcoin ETFs approved in the USA.

(Yes, we are.)

Many deserve credit for this milestone, but chiefly @Grayscale and its lawyers, who had the guts to fight this out in court and won.

Let’s fight more in 2024.

— Jake Chervinsky (@jchervinsky) January 4, 2024

Goldman Sachs has traditionally maintained a neutral position on cryptocurrencies and the wider digital asset sector. Matthew McDermott, Goldman Sachs’ head of digital assets, in a December 27 interview with Fox Business, expressed that the approval of a Bitcoin ETF would significantly contribute to the maturation of the cryptocurrency market and encourage more institutional investments into digital assets.

Spot Bitcoin ETF Approval Looming

While a spot Bitcoin ETF has yet to receive approval in the United States, ETF analysts are highly optimistic, estimating a 90% chance of approval occurring before January 10.

New Research note from me today. We still believe 90% chance by Jan 10 for spot #Bitcoin ETF approvals. But if it comes earlier we are entering a window where a wave of approval orders for all the current applicants *COULD* occur pic.twitter.com/u6dBva1ytD

— James Seyffart (@JSeyff) November 8, 2023

At present, 14 asset managers are aspiring to launch a spot Bitcoin ETF. This would allow institutional investors regulated and direct exposure to Bitcoin within the United States.

SEC’s Concerns Over In-Kind Model for BTC Transactions Unresolved

As previously reported, asset managers often favor the in-kind model for creating and redeeming shares. This is due to its efficiency and reduced tax complexity. However, the SEC has reservations about this approach. The regulatory agency is concerned that in-kind redemptions could present balance sheet challenges for registered broker-dealers who have to carry out these transactions. The core of the issue lies in the requirement for these entities to physically hold and directly deal with BTC. This introduces potential financial and operational risks.

BlackRock has gone cash only. That’s basically a wrap. Debate over. In-kind will have to wait. It’s all about getting ducks in row bf holidays. Good sign. https://t.co/vgocs1aIwS

— Eric Balchunas (@EricBalchunas) December 19, 2023

In a bid to alleviate these concerns, BlackRock presented an alternative in-kind model during a November meeting with the SEC. This revised model was designed to minimize the balance sheet risks associated with handling BTC. Despite BlackRock’s efforts to address the regulatory apprehensions, their proposal did not lead to an immediate resolution or approval from the SEC.

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About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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