In a bold critique of the U.S. SEC Gabor Gurbacs, the Director of Digital Assets Strategy at Vaneck, dismissed the regulatory body's insistence on a cash-only requirement for spot bitcoin exchange-traded funds (ETFs) as "nonsense." Gurbacs expressed his skepticism on social media, characterizing the SEC's approach as nothing more than "Kabuki theatre."
"The cash-only create/redeem requirement for the bitcoin ETPs is Kabuki theatre … It’s nonsense to restrict bitcoin ETPs to cash only," remarked Gurbacs on Thursday. He argued that this restriction is unjustified given that publicly listed companies already hold billions of dollars in bitcoin on their balance sheets, obtained through various means such as transfers from trading platforms and mining activities.
Hong Kong SAR (China) emerged in Gurbacs' commentary as a more open-minded regulatory environment, as it allows both cash and in-kind models for spot bitcoin ETFs. Gurbacs commended Hong Kong's flexibility, suggesting that a more relaxed regulatory stance could lead to a significant capital and competitive advantage. Notably, this week, the Hong Kong Securities and Futures Commission (SFC) unveiled rules permitting funds to launch spot bitcoin ETFs using both cash and in-kind methods.
The SEC is presently evaluating 13 spot bitcoin ETF applications, including one from Vaneck. Recent discussions between the securities regulator and ETF issuers have revealed the SEC's preference for the cash creation method. Gurbacs shared insights into this ongoing discourse, stating, "Given that public companies hold bitcoin from various sources, I wouldn’t expect cash-only creates to hold out for too long." He emphasized that in-kind creations and redemptions are more efficient and advantageous for investors, predicting that issuers will actively advocate for this model.
The evolving dynamics in the regulation of spot bitcoin ETFs suggest a competition among jurisdictions to adopt more favorable and innovative frameworks. As the SEC grapples with its stance, market participants are closely watching the developments, anticipating the potential impact on the broader landscape of digital asset investment products. The outcome of this regulatory tug-of-war could significantly influence the future trajectory of the burgeoning bitcoin ETF market.
