SEC Commissioner Peirce Pierce recently suggested the possibility of allowing physical redemption for Bitcoin (BTC) ETF. This is expected to provide cryptocurrency investors with a more efficient investment environment.
Peirce Pierce explained that redeeming ETF shares with actual Bitcoin instead of cash would be more efficient in terms of taxes and operations. Particularly in an interview with Coinage Media, he emphasized that "we should be able to design products in the most helpful way for investors".
Currently, Bitcoin ETFs use a cash redemption model. ETF issuers must sell Bitcoin in the market when investors redeem shares, which becomes taxable and incurs additional costs.
BlackRock ($BLK) and ARK Invest have already proposed transitioning to a physical redemption method. BlackRock submitted a proposal to Nasdaq earlier this year to allow physical redemption of iShares Bitcoin Trust, and analysts are evaluating this as a wise measure to reduce tax burden and operational costs.
Given that the SEC approved physical Bitcoin ETFs in early 2024 but has maintained cash redemption, Peirce's statement suggests the possibility of a more flexible approach by the regulatory authority.
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