Hashdex Names BitGo as Bitcoin ETF Custodian as Applicants Continue SEC Meetings

Hashdex, a potential issuer of a bitcoin exchange-traded fund (ETF), has named BitGo as its bitcoin custodian and changed the name of its Bitcoin Futures ETF to the Hashdex Bitcoin ETF, as it continues to seek approval for the U.S.’s first spot bitcoin ETF in early 2024. The majority of applicants have signed agreements with Coinbase, while Fidelity plans to self-custody and VanEck has tapped Gemini. On Thursday, representatives from BlackRock, Valkyrie, Fidelity, Grayscale, and Ark met with the SEC, with a deadline for final amendments set for December 29. Hopes have risen for a potential approval as applicants address minor details and specify cash creation for ETF issuance. The SEC is expected to make a decision as early as the first few days of the new year.

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Hashdex Names BitGo as Bitcoin ETF Custodian as Applicants Continue SEC Meetings

Introduction

As the race for a spot bitcoin exchange-traded fund (ETF) approval heats up, Hashdex, a would-be ETF issuer, has made significant changes to its paperwork. In an amended S-1 filing, Hashdex has named BitGo as its bitcoin custodian and rebranded its Bitcoin Futures ETF to the Hashdex Bitcoin ETF. This move comes as various companies, including BlackRock, Valkyrie, Fidelity, Grayscale, and Ark, continue to meet with representatives from the U.S. Securities and Exchange Commission (SEC) in hopes of obtaining approval for their respective ETF applications.

Background Information

The approval of a bitcoin ETF has long been a topic of discussion and anticipation in the cryptocurrency industry. An ETF would provide a regulated and accessible way for investors to gain exposure to bitcoin without having to directly own or manage the digital asset. While several countries, including Canada and Brazil, have already approved bitcoin ETFs, the U.S. has yet to follow suit. The SEC has been cautious in its approach to approving such products due to concerns regarding market manipulation, custody, and investor protection.

Overview of Bitcoin ETF Custodians

One of the key considerations for a bitcoin ETF is the selection of a custodian. A custodian is responsible for securely holding the underlying bitcoin and ensuring its safekeeping. In the U.S., various custodians have emerged as prominent options for ETF issuers. Coinbase, a leading cryptocurrency exchange, has been a popular choice, with many applicants signing agreements with the platform. Fidelity, a financial services company, has opted for self-custody, while VanEck has partnered with Gemini, another prominent exchange.

Hashdex’s Choice of BitGo as Custodian

In a surprising move, Hashdex has selected BitGo as its bitcoin custodian. BitGo, a digital asset trust company, offers institutional-grade storage solutions and has gained a reputation for its robust security measures. While Coinbase remains a popular choice among ETF applicants, Hashdex’s decision to partner with BitGo demonstrates the diversity of custodian options available in the market. By choosing BitGo, Hashdex aims to leverage the company’s expertise and track record to enhance the security and trustworthiness of its bitcoin ETF.

Other Custodian Options for Bitcoin ETFs

While BitGo and Coinbase have emerged as prominent custodial options for bitcoin ETFs, other companies also provide secure storage solutions. Anchorage, for example, offers a specialized system that combines hardware security modules with sophisticated software to protect digital assets. Gemini, the custodian chosen by VanEck, prides itself on its regulatory compliance and institutional-grade security. It is worth noting that custodian selection can play a crucial role in determining the approval and success of a bitcoin ETF, as regulatory bodies prioritize investor protection and asset security.

SEC Meetings with ETF Applicants

The SEC has been actively engaging with various ETF applicants to gather information and address concerns. Recently, representatives from companies such as BlackRock, Valkyrie, Fidelity, Grayscale, and Ark had the opportunity to meet with SEC officials. These meetings allow applicants to present their cases, discuss their proposed ETF structures, and address any regulatory concerns that the SEC may have. The SEC has set a deadline of December 29 for final amendments to the applications, indicating that a decision on bitcoin ETF approvals may be imminent.

Applicants’ Amendments to ETF Applications

In their efforts to secure approval from the SEC, many ETF applicants have made amendments to their initial applications. These amendments often address specific concerns raised by the SEC or propose alternative approaches to satisfy regulatory requirements. One common amendment is to specify that ETF shares will be issued through cash creation rather than in-kind, which may alleviate concerns related to custody and market manipulation. The willingness of applicants to modify their proposals indicates a positive and proactive approach to addressing regulatory concerns and increasing the likelihood of approval.

References

• Crypto Prices CoinDesk Market Index
• CoinDesk News and Analysis
• SEC Meeting with ETF Applicants
• BitGo
• Coinbase
• VanEck

This article is for informational purposes only and does not constitute financial or investment advice. Any potential investment in bitcoin ETFs should be made after thorough research and consideration of individual risk tolerance.

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