Goldman Sachs explores role in BlackRock, Grayscale’s spot Bitcoin ETFs

Major global financial player Goldman Sachs is reportedly discussing a potential role as an authorized participant (AP) in Bitcoin exchange-traded funds (ETFs) proposed by BlackRock and Grayscale.

Anonymous sources told crypto-focused media Coindesk that Goldman Sachs will facilitate the creation and redemption process in the primary market of Bitcoin ETFs. APs play a crucial role in ensuring the market price of ETFs aligns with the actual value of the underlying assets, promoting market efficiency.

Both Goldman Sachs and BlackRock declined to comment, while Grayscale did not respond immediately.

Despite the unconfirmed status, Goldman Sachs, being one of the world’s 30 largest banks, could significantly enhance the offerings of any ETF provider. This move by major banks, including JPMorgan Chase and Cantor Fitzgerald, reflects a broader trend of traditional financial institutions actively embracing opportunities in the digital asset space.

Their participation is expected to contribute to the legitimacy and reliability of Bitcoin ETFs. The potential approval of Bitcoin ETFs has the power to impact the cryptocurrency market, providing investors with an alternative way to invest in Bitcoin without directly purchasing the currency.

Goldman Sachs executive Mathew McDermott anticipates the digital assets marketplace will mature and grow in 2024. McDermott suggests that the digital assets space, having established the efficacy of its technology, is now focusing on building scale and realizing commercial value propositions.

Regulatory challenge

The United States Securities and Exchange Commission (SEC) is expected to decide on a spot ETF application from Ark Invest and 21Shares by Wednesday, January 10. Numerous experts anticipate the approval of multiple ETFs around that time, with some speculating on the possibility of an earlier approval by Friday, January 5.

As of now, the only approved cryptocurrency ETFs are linked to futures contracts for Bitcoin and Ethereum.

The regulatory body emphasized that only fully completed and timely applications adhering to the cash redemption model would be considered for initial approval, with a focus on avoiding in-kind redemptions involving non-monetary payments like Bitcoin. This warning highlighted the SEC’s scrutiny and specific criteria for evaluating Bitcoin ETF applications.

Seeking SEC approval for spot Bitcoin ETFs has become a complex task, with 14 asset managers navigating the regulation. Moreover, the SEC is historically cautious due to concerns about market manipulation and investor protection and has previously rejected such proposals.

The SEC recently held meetings with various firms, including BlackRock, Grayscale Investments, ARK Invest, and 21 Shares, alongside representatives from Nasdaq and the Chicago Board Options Exchange.

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