Bitcoin ETF issuers Fidelity and Galaxy race to offer lowered fees ahead of SEC approvals
Fidelity and Galaxy Digital are positioning themselves to gain early traction by naming Wall Street partners while setting competitive expense ratios of 0.39% and 0.59%, respectively.
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As the Securities and Exchange Commission appears close to approving the first Bitcoin exchange-traded funds (ETFs), major issuers like Fidelity and Galaxy Digital have positioned themselves to gain early traction by naming Wall Street partners to help operate their funds while setting competitive expense ratios of 0.39% and 0.59% respectively.
Recently updated filings provide key details on how the hotly anticipated ETFs will function, with lower fees and robust market-making relationships likely to attract significant assets from investors eager to gain regulated crypto exposure.
ETFs rely on authorized participants, specifically large institutional trading firms that can create and redeem fund shares, to help keep the ETF’s price in line with the underlying asset. A report from Fortune details that Fidelity, Galaxy/Invesco, WisdomTree, Valkyrie, and BlackRock have named specific Wall Street firms like Jane Street Capital, JPMorgan, Cantor Fitzgerald, and Virtu as the authorized participants (APs) that will handle share creation/redemption for their respective Bitcoin ETFs.
Securing relationships with these major market makers is critical for stabilizing a Bitcoin ETF, which has a slew of new complexities compared to ETFs tracking traditional assets. Typically, authorized participants directly buy or obtain assets from an ETF issuer in an “in-kind” model.
However, the SEC has advocated for a cash redemption approach to Bitcoin ETFs. This means the ETF issuer handles all Bitcoin transactions rather than broker-dealers. The cash model demonstrates the SEC remains cautious about allowing major financial players to hold crypto assets directly. By keeping Bitcoin transactions restricted to issuers, the agency can limit wider industry exposure as it tests the waters with its first approvals.
The SEC has historically rejected Bitcoin ETF proposals, citing concerns about potential manipulation and immature crypto markets. Among the first to file for an ETF of this kind were the Winklevoss twins, who co-founded the Gemini crypto exchange. The Commission’s stance on a Bitcoin ETF radically shifted in 2023 when crypto asset manager Grayscale won a critical court case against the agency. This legal inroad effectively pried open the possibility of approval after years of rejection, resulting in the regulatory agency reassessing its stance on Bitcoin ETFs.
After the Grayscale case, the SEC seems poised to approve the first wave of Bitcoin ETFs following a decade of resistance. The expected approvals mark a major shift in the agency’s stance and could significantly expand access to crypto exposure for a broader audience of new investors.
A recent report from Reuters details how the SEC has requested final revisions to Bitcoin ETF applications by year’s end. The deadline signals potential approvals as soon as January 10th, the estimated date for which the SEC must greenlight or reject ARK/21Shares, the first issuer in line. The condensed timeline indicates how the Commission is finally prepared to launch the first batch of Bitcoin ETFs after years of rejection.
As the estimated approval date approaches and community anticipation continues to mount behind the decision, Bitcoin has crossed the $45,000 price level for the first time since 2022.
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