The Securities and Exchange Commission (SEC) has delayed its decisions on in-kind redemptions for WisdomTree’s Bitcoin Fund and VanEck’s Bitcoin Fund, as well as staking in Grayscale’s Ethereum Trusts, sparking concerns among investors and industry experts.
The Securities and Exchange Commission (SEC) has delayed its decisions on two critical features that issuers of spot crypto exchange-traded funds (ETFs) are hoping to add to their products. In-kind redemptions for WisdomTree’s Bitcoin Fund and VanEck‘s Bitcoin Fund, as well as staking in Grayscale‘s Ethereum Trusts, will now be decided upon by June 3rd and June 1st, respectively.
The Securities and Exchange Commission (SEC) has delayed its decisions on two critical features that issuers of spot crypto exchange-traded funds (ETFs) are hoping to add to their products. In-kind redemptions for WisdomTree’s Bitcoin Fund and VanEck’s Bitcoin Fund, as well as staking in ‘Grayscale’s Ethereum Trusts’ , will now be decided upon by June 3rd and June 1st, respectively.
Background on In-Kind Redemptions
In-kind redemptions allow investors to exchange their ETF shares for the underlying cryptocurrency. This feature has been approved by several other jurisdictions, including ‘Hong Kong,’ ‘Canada,’ and ‘Europe,’ but its approval remains pending with the SEC.
In-kind redemptions refer to the exchange of goods or services for other goods or services, rather than monetary compensation.
This practice is commonly used in tax-exempt bond issuances and charitable donations.
In these scenarios, investors or donors receive benefits such as reduced taxes, increased philanthropic impact, or improved community development.
For instance, a company may donate equipment to a local school in exchange for tax deductions.
In-kind redemptions can be beneficial for both parties, promoting economic growth and social responsibility.
Staking in Ethereum ETFs
Staking enables investors to earn interest on their holdings by ‘staking’ or locking up their assets. ‘Grayscale’s proposal to allow staking in its Ethereum Trusts’ has been requested by several exchanges, including NYSE Arca, which is associated with five of the other issuers of an ether ETF.
A stake is an instrument used to secure or fasten something, typically by piercing it into the ground.
It can be made from various materials such as wood, metal, or plastic.
In finance, a stake refers to a portion of ownership in a company or asset.
A stakeholder is an individual or entity with a vested interest in a project or organization.
The concept of a stake has been used throughout history for various purposes, including agriculture, construction, and security.
SEC’s Delays and Implications
The SEC’s delays have sparked concerns among investors and industry experts. ‘James Seyffart,’ ETF analyst at Bloomberg Intelligence, noted that the regulator will take its time to make decisions and may not be swayed by the approval of similar features in other jurisdictions. ”They don’t care what other regulators are doing in my experience,” he said.
The SEC’s approach is seen as a reflection of its own pace and priorities. While several other markets have already green-lighted staking for ETFs, the SEC is moving at its own speed. The delayed decisions will likely have implications for investors and issuers alike, particularly those who are hoping to add these features to their products.
Key Dates
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June 3rd: Decision on in-kind redemptions for ‘WisdomTree’s Bitcoin Fund’ and ‘VanEck‘s Bitcoin Fund’
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June 1st: Decision on Grayscale‘s proposal to allow staking in its Ethereum Trusts
Ethereum trusts refer to the decentralized, permissionless networks that store and manage digital assets on the Ethereum blockchain.
These trusts operate independently of traditional financial institutions and enable users to create, issue, and transfer tokens without intermediaries.
Ethereum trusts rely on smart contracts to automate trust operations, ensuring transparency and security.
They have gained popularity for their ability to facilitate cross-border transactions, reduce transaction costs, and increase accessibility to financial services.
