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Pando Asset Enters ETF Race as BlackRock and SEC Have Further Discussions About Bitcoin Product

Last Updated November 30, 2023 5:34 PM
Josh Adams
Last Updated November 30, 2023 5:34 PM
Key Takeaways
  • Pando Asset has become the latest entrant to the spot Bitcoin ETF race.
  • The Swiss firm filed its application on November 29.
  • It becomes the thirteenth applicant waiting for SEC approval.

The battle for the first U.S. spot bitcoin exchange-traded fund (ETF) just got more competitive as Pando Asset threw its hat in the ring on November 29th. The Switzerland-based financial services company is the thirteenth applicant overall in this heated race.

Pando Asset Enters the ETF Race

With its filing  on Wednesday, Novemver 29, Pando Asset is aiming to give investors an easier way to get exposure to Bitcoin, the notoriously volatile cryptocurrency. The proposed Pando Asset Spot Bitcoin Trust would hold bitcoin directly, allowing shares to closely track the asset’s price.

The company joins the likes of Fidelity and Grayscale in pursuit of regulatory approval. So far, the Securities and Exchange Commission has rejected all applications for spot bitcoin ETFs, though it has greenlit several futures-based products. The regulatory agency has expressed concerns around potential fraud and manipulation in crypto markets.

The proposed structure of the Pando Asset Spot Bitcoin Trust appears similar to prior filings. The Trust would hold bitcoin directly in cold storage with Coinbase Custody Trust Company acting as custodian. Shares in the Trust would be listed and traded on the Cboe BZX Exchange.

In its S-1 filing, Pando Asset stated “The Shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly.” This follows the approach of previous spot bitcoin ETF applicants in arguing the Trust would provide simpler and safer exposure compared to owning cryptocurrency directly.

A Change To A Prepayment Model

In other news, BlackRock is betting that another change in its application will open the door to approval after yet another closed-door meeting with the SEC this week.

The asset management titan aims to resolve the Commission’s hesitations in order to get the regulator’s seal of approval. BlackRock submitted fresh proposals to the SEC’s Division of Trading and Markets on November 28th, revealed in a newly published document .

The crux lies in a rejigged in-kind redemption structure that adds a prepayment requirement. This compelled offshore market makers to forward cash to registered broker-dealer entities before the broker-dealers handed over ETF shares during redemptions.

BlackRock believes segregating broker-dealers from intricate Bitcoin transfers should limit balance sheet impacts that previously spooked the SEC.

Beyond shielding broker-dealers, BlackRock insists its nuanced in-kind approach retains several key virtues compared to alternatives like cash redemption models. The method promises lower costs, simpler mechanics, resistance to manipulation, and incentives better aligned with shareholders.

BlackRock has submitted a revised proposal for a spot Bitcoin ETF
BlackRock’s revised model for redemptions. Source: SEC.

SEC Has Yet To Approve Any Spot Bitcoin ETFs

The asset manager clearly wagered these virtues would finally sway the SEC to permit a spot Bitcoin ETF as the likes of Fidelity Investments likewise seek approval. Thus far, the SEC has stonewalled spot Bitcoin ETFs over worries around potential market manipulation and limited surveillance capabilities.

Now all eyes turn to the SEC’s response to assess whether BlackRock’s technical tweak struck the delicate balance between innovation and prudent regulation. With heavyweight backing and months of deliberation, could this ETF rewrite break the regulatory deadlock? The markets certainly hope so.

With so many applications yet to be approved, there is widespread speculation  that multiple spot Bitcoin ETFs will be approved at once.

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