According to The Block, the U.S. Securities and Exchange Commission (SEC) has been working with ETF issuers in recent weeks to address three major concerns related to ETFs, including: which creation and redemption model to adopt, which institutions to designate as Authorized Participants (APs), and how to handle hard forks and airdrops.
The issue of “which creation and redemption model to adopt” has been discussed for some time, with most issuers preferring the “physical model” due to tax and procedural advantages. However, the SEC has been adamant that all issuers must choose the “cash model.” It was even reported that the SEC issued a notice stating that issuers must amend their prospectuses to adopt the “cash model” if they want to be on the first approved list. Eventually, all issuers complied with this requirement, with even Grayscale, which had always insisted on using the physical model, amending its S-3 document on December 26 to switch to the cash model.
On the other hand, issuers have also begun selecting financial institutions in recent weeks to act as “Authorized Participants” in their proposed Bitcoin ETFs. Grayscale is reportedly in discussions with companies including JPMorgan and Goldman Sachs, while BlackRock had previously designated JPMorgan Securities as the Authorized Participant for its proposed Bitcoin ETF, along with Jane Street Capital.
The last issue that has been resolved is how to address hard forks and airdrops on the Bitcoin network. Sources revealed that issuers have agreed that their trusts will waive any rights related to hard forks, including forked coin airdrops. For example, on December 26, Grayscale amended its 3-S form to stipulate that its spot Bitcoin ETF, if approved, will not receive any tokens through hard forks or airdrops.