Georgetown Professor Urges SEC to Embrace In-Kind Creation Method for Spot Bitcoin ETFs
A finance professor at Georgetown University has recently voiced his concerns over the U.S. Securities and Exchange Commission's (SEC) proposed cash-only rule for the creation and redemption of spot bitcoin exchange-traded funds (ETFs). Instead, the professor advocates for the use of the in-kind creation method, which has been supported by major applicants like Blackrock and Fidelity.
In a letter addressed to the SEC, Professor James Angel emphasized the importance of not micromanaging the creation/redemption process for spot bitcoin ETFs. He argued that now that the SEC is seemingly comfortable with allowing these ETFs to trade in the U.S., it should not hinder the market by imposing a suboptimal product.
The Benefits of In-Kind Creation Method
According to Professor Angel, the in-kind creation method offers several advantages over the cash creation method. By allowing authorized participants (APs) to create/redeem ETF shares in-kind, trading costs and execution risks are significantly reduced. In contrast, the cash creation method imposes costly frictions on the create/redeem process, leading to wider bid-ask spreads and potential mispricing of the ETF relative to the spot price.
Furthermore, the professor highlighted that the cash creation method would require the ETF (and its shareholders) to bear the transaction costs of buying and selling bitcoin. These costs include bid-ask spreads and operational expenses associated with executing and monitoring transactions in the bitcoin markets. By adopting the in-kind creation method, the ETF can eliminate these costs and provide a more cost-effective solution for investors.
Freedom for ETF Sponsors
Professor Angel stressed the importance of granting ETF sponsors the freedom to accept bitcoin directly and to determine the most suitable approach for the creation/redemption process. He noted that these sponsors have decades of experience with creating and redeeming ETFs and should be trusted to make professional judgments. By resisting the urge to micromanage this process, the SEC can leverage the expertise of sponsors and foster innovation in the market.
Both Blackrock and Fidelity, major players in the financial industry, have expressed their support for the in-kind model. They have highlighted the lower transaction costs, increased resistance to market manipulation, reduced risks of operating events, and overall simplicity that this method offers. Blackrock has even proposed a revised in-kind model for its spot bitcoin ETF.
Ensuring a Positive Development for Spot Bitcoin ETFs
In conclusion, Professor Angel urged the SEC to consider the benefits of the in-kind creation method and avoid forcing a suboptimal product to come to market. With the growing acceptance of spot bitcoin ETFs in the U.S., it is crucial for the SEC to support a framework that maximizes efficiency and minimizes costs for investors. By doing so, the SEC can ensure a positive development for spot bitcoin ETFs and contribute to the growth of the digital asset market.
What are your thoughts on this matter? Share your opinions in the comments section below.
Frequently Asked Questions
Do You Need to Open a Precious Metal IRA
Precious metals are not insured. This is the most important fact to know before you open an IRA account. There are no ways to recover the money you lost in an investment. This includes all investments that are lost to theft, fire, flood, or other causes.
You can protect yourself against such losses by purchasing physical gold and silver coins. These items have been around for thousands of years and represent real value that cannot be lost. If you were to sell them today, you would likely receive more than what you paid for them when they were first minted.
Consider a reputable business that offers low rates and good products when opening an IRA. You should also consider using a third party custodian to protect your assets and give you access at any time.
Remember that you will not see any returns unless you are retired if you open an Account. Don't forget the future!
What is the best precious metal to invest in?
The answer to this question depends on how much risk you are willing to take and what type of return you want. Although gold has been considered a safe investment, it is not always the most lucrative. You might not want to invest in gold if you're looking for quick returns. You should invest in silver if you have the patience and time.
Gold is the best investment if you aren't looking to get rich quick. Silver may be a better option for investors who want long-term steady returns.
Which precious metals are best to invest in retirement?
The best precious metal investments are gold and silver. They are both easy to trade and have been around for years. They are a great way to diversify your portfolio.
Gold: One of the oldest forms of currency, gold, is one of mankind's most valuable. It's also very safe and stable. It's a great way to protect wealth in times of uncertainty.
Silver: Investors have always loved silver. It is an excellent choice for investors who wish to avoid volatility. Unlike gold, silver tends to go up instead of down.
Platinum: A new form of precious metal, platinum is growing in popularity. It's durable and resists corrosion, just like gold and silver. It's also more expensive than the other two.
Rhodium: The catalytic converters use Rhodium. It is also used in jewelry-making. It is relatively affordable when compared to other types.
Palladium (or Palladium): Palladium can be compared to platinum, but is much more common. It is also cheaper. It is a preferred choice among investors who are looking to add precious materials to their portfolios.
Should You Invest Gold in Retirement?
How much money you have saved, and whether or not gold was an option when you first started saving will determine the answer. If you're unsure about which option to choose then consider investing in both.
In addition to being a safe investment, gold also offers potential returns. It's a great investment for retirees.
Most investments have fixed returns, but gold's volatility is what makes it unique. This causes its value to fluctuate over time.
This does not mean you shouldn’t invest in gold. Instead, it just means you should factor the fluctuations into your overall portfolio.
Another benefit to gold? It's a tangible asset. Gold is much easier to store than bonds and stocks. It is also easily portable.
Your gold will always be accessible as long you keep it in a safe place. Plus, there are no storage fees associated with holding physical gold.
Investing in gold can help protect against inflation. As gold prices rise in tandem with other commodities it can be a good hedge against rising cost.
It's also a good idea to have a portion your savings invested in something which isn't losing value. Gold usually rises when the stock market falls.
Investing in gold has another advantage: you can sell it anytime you want. Like stocks, you can sell your position anytime you need cash. You don't even need to wait for your retirement.
If you do decide to invest in gold, make sure to diversify your holdings. Don't place all your eggs in the same basket.
Don't buy too many at once. Start by purchasing a few ounces. Next, add more as required.
Don't expect to be rich overnight. Rather, it's to build up enough wealth so you won't need to rely on Social Security benefits.
And while gold might not be the best investment for everyone, it could be a great supplement to any retirement plan.
Is gold a good investment IRA option?
For anyone who wants to save some money, gold can be a good investment. You can diversify your portfolio with gold. But gold is not all that it seems.
It has been used as a currency throughout history and is still a popular method of payment. It's often referred to as “the world's oldest currency.”
Gold is not created by governments, but it is extracted from the earth. Because it is rare and difficult to make, it is extremely valuable.
Gold prices fluctuate based on demand and supply. When the economy is strong, people tend to spend more money, which means fewer people mine gold. The value of gold rises as a consequence.
On the flip side, people save cash for emergencies and don't spend it. This results in more gold being produced, which drives down its value.
It is this reason that gold investing makes sense for businesses and individuals. You will benefit from economic growth if you invest in gold.
Your investments will also generate interest, which can help you increase your wealth. If gold's value falls, you don't have to lose any of your investments.
What is a Precious Metal IRA and How Can You Benefit From It?
A precious metal IRA allows for you to diversify your retirement savings in gold, silver, palladium and iridium. These metals are known as “precious” because they are rare and extremely valuable. They make excellent investments for your money and help you protect your future from inflation and economic instability.
Bullion can be purchased via a variety of channels including online sellers, large coin dealers, and grocery stores.
An IRA for precious metals allows you to directly invest in bullion instead of purchasing stock shares. This will ensure that you receive annual dividends.
Precious metal IRAs do not require paperwork nor annual fees, unlike regular IRAs. You pay only a small percentage of your gains tax. Additionally, you have access to your funds at no cost whenever you need them.
Should You Purchase Gold?
Gold was considered a safety net for investors during times of economic turmoil in the past. Today, many people are looking to precious metals like gold and avoiding traditional investments like bonds and stocks.
The gold price has been in an upward trend for the past few years, but it remains relatively low compared with other commodities like silver or oil.
Experts think this could change quickly. Experts predict that gold prices will rise sharply in the wake of another global financial collapse.
They also point out that gold is becoming popular because of its perceived value and potential return.
Here are some things to consider if you're considering investing in gold.
- Consider whether you will actually need the money that you are saving for retirement. You can save for retirement and not invest your savings in gold. However, you can still save for retirement without putting your savings into gold.
- Second, make sure you understand what you're getting yourself into before you start buying gold.There are several different types of gold IRA accounts available. Each one offers different levels security and flexibility.
- Don't forget that gold does not offer the same safety level as a bank accounts. It is possible to lose your gold coins.
If you are thinking of buying gold, do your research. And if you already own gold, ensure you're doing everything possible to protect it.
- (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)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.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)
- Saddam Hussein's InvasionHelped Uncage a Bear In 90 – WSJ
- Want to Keep Gold in Your IRA at Home? It's not exactly legal – WSJ
- 7 U.S. Code SS 7 – Designation of boards of trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement account
- Fraud Advisory: Precious Metals Fraud
By: Kevin Helms
Title: Finance Professor Criticizes SEC's Cash-Only Rule for Spot Bitcoin ETFs, Advocates for In-Kind Model
Sourced From: news.bitcoin.com/finance-professor-blasts-secs-potential-cash-only-rule-for-spot-bitcoin-etfs-citing-benefits-of-in-kind-model/
Published Date: Sat, 16 Dec 2023 02:30:30 +0000