SEC’s Advice Regarding Spot Bitcoin ETFs
The Securities and Exchange Commission (SEC) has provided specific guidance to exchanges seeking to list and trade spot bitcoin exchange-traded funds (ETFs) on what they should do next. This development has been seen as real progress within the crypto industry, as it brings clarity to the cash versus in-kind debate.
Optimism for Spot Bitcoin ETF Approval
Optimism for spot bitcoin exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC) surged again on Friday after a report emerged, stating that the SEC has engaged with exchanges to provide guidance on spot bitcoin ETF applications.
According to Bloomberg ETF analyst Eric Balchunas, the SEC's Division of Trading and Markets has been in discussions with exchanges, advising them to use the cash creation method instead of the in-kind method for spot bitcoin ETFs. The securities regulator has reportedly asked exchanges to file amendments to reflect this change within the next couple of weeks. This development has been viewed as a positive sign.
Cash Creation Method
ETF units can be created either in-kind or in cash. In the cash creation method, authorized participants provide cash to the ETF issuer in exchange for new ETF units.
Balchunas believes that cash creation makes sense because broker-dealers cannot deal in bitcoin. By using cash creation, the onus is on the issuers to transact in bitcoin, and it relieves broker-dealers from having to use unregistered subsidiaries or third-party firms. He sees this as a way to provide fewer limitations for broker-dealers.
However, Balchunas also notes that only 2-3 filers had planned cash creates, while the rest wanted to use the in-kind method. Those filers may need to adjust their plans or risk delays. Despite this, Balchunas maintains that this development does not significantly change the odds of spot bitcoin ETF approval, which he estimates at 90%.
Positive Reception in the Crypto Space
The SEC's advice has been viewed positively by many within the crypto space. Marshall Beard, Chief Strategy Officer at crypto exchange Gemini, sees it as a sign of real progress. He believes that the cash versus in-kind debate is starting to find clarity. Beard also points out that Canadian spot ETFs have been using the cash creation model for years.
However, there are some who argue that in-kind creates are superior to cash creates. Gabor Gurbacs, strategy advisor at Vaneck, believes that the SEC's advice on cash creates shows that regulators are unwilling to understand and accept the best aspects of ETFs and bitcoin. He emphasizes that in-kind creates are simply more efficient, and anyone managing an ETF knows this.
Balchunas acknowledges the SEC's perspective on cash creates but argues that from an investor's point of view, in-kind creates may be better in terms of spread and taxation. He speculates that some issuers may push for the in-kind process and could potentially succeed in engaging with SEC staff.
Expectations for Future Approvals
SEC Chairman Gary Gensler has recently stated that the securities regulator is considering eight to ten spot bitcoin ETF applications. Many anticipate that the SEC will approve multiple spot bitcoin ETFs simultaneously early next year.
What are your thoughts on the SEC advising exchanges to use cash creates for spot bitcoin ETFs? Let us know in the comments section below.
Frequently Asked Questions
Who is entitled to the gold in a IRA that holds gold?
An individual who has gold is considered to be a “form of money” by the IRS and subject to taxation.
To be eligible for the tax-free status, you must possess at least $10,000 gold and have had it stored for at least five consecutive years.
Gold can be used to protect against inflation and price volatility. However, it is not a good idea to own gold if you don't intend to use it.
You will need to declare the value of gold if you intend on selling it one day. This could impact how capital gains taxes you owe for cash investments.
A financial planner or accountant should be consulted to discuss your options.
Can I buy Gold with my Self-Directed IRA?
Your self-directed IRA can be used to purchase gold, but first you need to open an account with a brokerage firm such as TD Ameritrade. You can also transfer funds from another retirement account if you already have one.
The IRS allows individuals up to $5.500 annually ($6,500 if you are married and filing jointly). This can be contributed to a traditional IRA. Individuals can contribute up to $1,000 annually ($2,000 if married and filing jointly) directly to a Roth IRA.
If you do decide that you want to invest, it is a good idea to buy physical bullion and not in futures. Futures contracts are financial instruments that are based on gold's price. These contracts allow you to speculate on future gold prices without actually owning it. But physical bullion refers to real gold and silver bars you can carry in your hand.
What are the benefits of having a gold IRA?
The best way to invest money for retirement is by putting it into an Individual Retirement Account (IRA). You can withdraw it at any time, but it is tax-deferred. You have total control over how much each year you take out. There are many types available. Some are better for those who want to save money for college. Others are designed for investors looking for higher returns. Roth IRAs are a way for individuals to make contributions after the age of 59 1/2, and then pay taxes on any earnings upon retirement. These earnings don't get taxed if they withdraw funds. This type account may make sense if it is your intention to retire early.
Because you can invest money in many asset classes, a gold IRA works similarly to other IRAs. Unlike a regular IRA where you pay taxes on gains, a gold IRA doesn't require you to worry about taxation while you wait to get them. For people who would rather invest than spend their money, gold IRA accounts are a good option.
Another benefit of owning gold through an IRA is that you get to enjoy the convenience of automatic withdrawals. This eliminates the need to constantly make deposits. You could also set up direct debits to never miss a payment.
Finally, gold is one of the safest investment choices available today. Because it's not tied to any particular country, its value tends to remain steady. Even in economic turmoil, gold prices tends to remain relatively stable. It is therefore a great choice for protecting your savings against inflation.
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- Gold IRA: Add some sparkle to your retirement nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
How to Hold Physical Gold in an IRA
The best way of investing in gold is to purchase shares from companies that produce gold. However, this method comes with many risks because there's no guarantee that these companies will continue to survive. Even if they do survive, there is still the possibility of losing money to fluctuating gold prices.
Another option is to purchase physical gold. You'll need to open a bank account, buy gold online from a trusted seller, or open an online bullion trading account. This option offers the advantages of being able to purchase gold at low prices and easy access (you don’t need to deal directly with stock exchanges). It is easier to view how much gold has been stored. The receipt will show exactly what you paid. You'll also know if taxes were not paid. You're also less susceptible to theft than investing with stocks.
However, there are some disadvantages too. You won't get the bank's interest rates or investment money. It won't allow you to diversify any of your holdings. Instead, you'll be stuck with what's been bought. Finally, tax man may want to ask where you put your gold.
Visit BullionVault.com to find out more about gold buying in an IRA.
By: Kevin Helms
Title: SEC’s Spot Bitcoin ETF Advice Fuels Hope for Approval — Crypto Industry Views It as ‘Real Progress’
Sourced From: news.bitcoin.com/report-of-secs-spot-bitcoin-etf-advice-fuels-hope-for-approval-crypto-industry-views-it-as-real-progress/
Published Date: Sun, 19 Nov 2023 01:00:20 +0000