Two key documents have been acknowledged by the US Securities and Exchange Commission: a filing for an amended report and a document filed in connection with a proposed amendment. Grayscale’s Litecoin spot is proposed Exchange-traded Fund (ETF) (LTC). And a separate application allowing for in-kind redeeming of BlackRock’s iShares Bitcoin (IBIT) ETFAccording to filings dated February 6,.
Analysts view the SEC’s engagement with these filings as a crucial step toward potential approval.
Bloomberg Senior ETF analyst Eric Balchunas previously said that the SEC’s interaction with the application raises the likelihood of approval, stating that a “Litecoin ETF has all the boxes checked”To obtain regulatory clearance.
Balchunas indicated that SEC’s comments about the S-1 amendement signaled regulatory momentum. Litecoin was widely viewed as a commodity, not a security. He suggested that an SEC shift in leadership might further influence the agency’s attitude.
The comments were made after Nasdaq filed a form 19b-4 on Jan. 16 seeking approval to list and trade a spot Litecoin ETF registered by Canary Capital.
The SEC’s latest acknowledgment strengthens expectations for a Litecoin ETF approval, with some analysts speculating the agency may opt to approve multiple crypto ETFs in a single batch.
Meanwhile, the industry has similar expectations regarding BlackRock’s application to allow in-kind redemptions. If the change is approved, it would enable investors to receive Bitcoins (BTC) directly during redemptions instead of having assets converted into cash. This change would increase efficiency for institutions and lower their tax liability.
This shift to in-kind redemptions is part of an industry trend to enhance ETF operational efficiency and liquidity. Large investors may be attracted to ETFs by in-kind transfer because it reduces the tax on capital gains and other slippage associated cash transactions.
Crypto ETFs: Regulatory framework
As digital asset regulations continue to develop, the SEC’s involvement with crypto ETFs is an indication of this.
The approval of Bitcoin ETFs on a spot basis has paved a way for other crypto-related investments vehicles. Litecoin is now considered Litecoin as Litecoin could be the second mover in the altcoin ETF market.
Participants in the market are closely watching whether regulatory approval is granted for redemption models that allow for in-kind exchanges. This could have a long-term impact on spot Bitcoin ETFs.
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