As the Bitcoin ETF saga reaches its goal here39s what.jpgw1920q75webpfalse

As the Bitcoin ETF saga reaches its goal, here's what you should keep an eye on: Blockworks

As industry observers keep an eye on the potential approval of spot Bitcoin ETFs, one analyst says specific application updates in the coming days could make the difference in whether or not companies can bring such products to market.

The U.S. Securities and Exchange Commission is expected to rule on a spot Bitcoin ETF proposal from Ark Invest and 21Shares by January 10. Some segment watchers have said they expect the regulator to decide on other similar planned products at that time.

The regulator has given fund groups a Dec. 29 deadline to submit final updates to their Bitcoin ETF filings, Portal reported last week, citing unnamed company executives.

Potential issuers of these funds have met with the SEC in recent weeks and continue to update their filings. However, fund groups are likely to add more details in the coming days, according to Bloomberg Intelligence analyst Eric Balchunas.

“The SEC is poised to approve spot Bitcoin ETFs, but only if they have clear language regarding cash-only creations and a signed agreement with an authorized participant – which many do not yet,” Balchunas wrote in a research note from Wednesday.

Authorized participants are companies that are permitted to create and redeem shares of an ETF. Such organizations may exchange ETF shares either for a corresponding basket of securities reflecting the ETF's holdings or exchange them for cash.

Read more: The SEC continues to meet with hopes for Bitcoin ETFs. Here's what they're discussing

Although Grayscale Investments appeared To argue in meetings with the SEC that non-cash transactions are more efficient, the company noted in a filing Tuesday that its proposed spot Bitcoin ETF could only accept cash orders.

“However, as with other spot Bitcoin exchange-traded products, the Trust is not currently able to create and redeem Shares through in-kind transactions with Authorized Participants, and there is no final regulatory guidance as to whether and how.” “Registered Brokers- Dealers may hold and trade Bitcoin in compliance with federal securities laws,” the document states.

BlackRock's proposed spot Bitcoin ETF would also include cash creations and redemptions – a change the SEC appears to have pushed for based on various proposal changes.

While some firms have agreed to “knee down” to the SEC on the cash transaction issue, Balchunas said it may be more difficult to reach an agreement with an authorized participant.

“A lot will develop in the next 48 hours; They hope they can all get through it and name the AP in the S-1 starting Friday,” he told Blockworks.

“When I see a prospectus with the name AP … I basically assume that the horse is in the starting line and ready for approval, but that is still uncertain,” Balchunas added. “At this point, getting to the starting position is half the battle, so there’s a race before the race.”

Balchunas said in Wednesday's research note that Bitwise and BlackRock have authorized participant agreements in place but did not disclose them in filings. Spokespeople for the two companies did not immediately respond to a request for comment.

Grayscale ready?

Grayscale was reportedly set to work with authorized participants Jane Street and Virtu Financial if the Grayscale Bitcoin Trust (GBTC) is allowed to convert into an ETF – a report confirmed by a Grayscale spokesperson at the time.

The company did not name these companies as authorized participants in its most recent S-3 filing, and a Grayscale representative had no further comment.

“Even if all the crucial boxes are checked, it is possible that the SEC will still hold [Grayscale] to come back from the starting gate in the name of maintaining a level playing field,” Balchunas wrote.

GBTC was founded in 2013 and eligible shares of the trust are listed on the OTC Markets Group. The Bloomberg Intelligence analyst said in his latest note that the company has about $26 billion in assets under management and regularly generates daily volume of about $150 million.

“This is a huge advantage for GBTC and makes it a clear favorite, even with the likes of BlackRock and Fidelity in the running,” Balchunas added. “This puts the SEC in a dilemma and risks becoming a kingmaker.”

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