Sophie Meyer
- Dec 11, 2023
- 2 min read

Fidelity's Meeting with SEC on Proposed Spot Bitcoin ETF

The image is a flowchart illustrating the process of 'In-Kind' redemption for ETF shares within the context of a spot crypto market platform. It details a nine-step process that involves various entities such as the ETF Market Maker, the AP (Authorized Participant) acting as an Agency, the Transfer Agent, the ETF Issuer, and the Bitcoin Custodian. The flowchart shows the flow of ETF shares and Bitcoin between these entities, indicating the registration status of the market makers, and the involvement of the Depository Trust Company (DTC). The steps are numerically ordered and color-coded to differentiate the roles and actions of the participants in the redemption process. The chart helps in understanding the complexity and the structured approach taken when redeeming ETF shares for Bitcoin, emphasizing the intricate relationships between traditional financial institutions and cryptocurrency assets.

A Pivotal Discussion on Bitcoin ETFs

On December 7, 2023, a significant meeting took place between representatives of Fidelity and the U.S. Securities and Exchange Commission (SEC). The core topic was Fidelity's proposed spot bitcoin Exchange-Traded Fund (ETF) under the title "Wise Origin Bitcoin Trust." This meeting marked a crucial step in the ongoing process of introducing a spot bitcoin ETF to the market.

Fidelity's Proposal: A Closer Look

Fidelity's presentation to the SEC focused on the "Bitcoin ETF Workflows." A key highlight was the emphasis on "In-Kind" creation and redemption models. Fidelity argued that physical creation and redemption processes are fundamental for improving the efficiency of trading and the accuracy of secondary market pricing.

The Significance of Physical Creations

Fidelity's proposal underscored the importance of physical creations for arbitrage and hedging strategies. They pointed out that self-clearing ETF market maker firms, when acting as Agency AP (Authorized Participant), can significantly enhance efficiency in arbitrage for firms with Crypto Affiliates that do not have self-clearing capabilities.

The Role of Market Participants

The proposal detailed the critical role of various market participants, including self-clearing and non-self-clearing ETF market maker firms, and their interactions with Crypto Affiliates. The emphasis was on how these interactions and the physical creation and redemption mechanism could collectively improve the overall market efficiency.

Fidelity’s Ongoing Commitment

In addition to the meeting, Fidelity also filed an amended S-1 form with the SEC for its proposed spot bitcoin fund. This move further demonstrates Fidelity's commitment to establishing a spot bitcoin ETF, marking a significant step in the financial industry's embrace of cryptocurrency.

Conclusion: A Step Towards New Financial Horizons

The meeting between Fidelity and the SEC and the subsequent discussions represent a pivotal moment in the journey towards integrating cryptocurrencies more deeply into the mainstream financial landscape. Fidelity's efforts in proposing the Wise Origin Bitcoin Trust spot bitcoin ETF could potentially pave the way for a new era in cryptocurrency-based financial products.

Disclaimer: This blog article is for informational purposes only and should not be considered financial advice. Inspiration: The information is based on the detailed document provided and the SEC meeting insights from December 7, 2023. Sources: https://www.sec.gov/comments/sr-nasdaq-2023-016/srnasdaq2023016-303319-781202.pdf and https://www.sec.gov/comments/sr-cboebzx-2023-044/srcboebzx2023044-308919-795162.pdf