Goldman Sachs to take role in BlackRock and Grayscale’s Bitcoin ETFs

abdelaziz Fathi

Wall Street investment bank Goldman Sachs is reportedly in discussions to become an authorized participant (AP) for the proposed spot bitcoin exchange-traded funds (ETFs) by BlackRock and Grayscale. This development was reported by CoinDesk, citing sources familiar with the matter.

An authorized participant plays a crucial role in the ETF industry, responsible for creating and redeeming ETF shares. This ensures that the ETFs trade closely with their underlying assets. If the talks are successful, Goldman Sachs would join other financial giants like JPMorgan Chase, Jane Street, and Cantor Fitzgerald, who are already slated to be APs for various bitcoin ETFs seeking approval from the U.S. Securities and Exchange Commission (SEC).

BlackRock, the world’s largest asset manager, has aligned with J.P. Morgan and quantitative trading firm Jane Street for its bitcoin ETF. Valkyrie, another ETF applicant, has named Jane Street and Cantor Fitzgerald as its APs. These partnerships are crucial as the asset managers are not legally allowed to purchase the cryptocurrency directly.

The involvement of major U.S. banks, traditionally cautious about direct dealings with cryptocurrencies, indicates a major shift. This change is partly attributed to the adoption of a cash-based mechanism for handling the bitcoin backing the shares, a strategy seen as vital for gaining SEC approval.

According to a Reuters report, which references public memos and sources familiar with the matter, SEC officials met last week with representatives from several firms, including BlackRock, Grayscale Investments, ARK Invest, and 21 Shares. The meeting also included representatives from Nasdaq and the Chicago Board Options Exchange, along with lawyers and issuers involved in these ETFs.

At these meetings, the US top watchdog warned that only applications fully completed and filed by the deadline would be considered for the initial round of approvals. Fox Business journalist Eleanor Terrett, one of the first to report on this deadline, highlighted that the SEC is particularly focused on filings that adhere to the cash redemption model, rather than in-kind redemptions which involve non-monetary payments like Bitcoin.

This shift to a cash redemption model, replacing in-kind redemptions, has been a major change for many applicants. The SEC is also reportedly insisting that Bitcoin ETF filers name their authorized participants (AP) in their submissions.

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