Bitcoin ETF competition pushes issuers to disclose addresses – Samson Mow

Some industry insiders say a potential area for bitcoin (BTC) exchange-traded funds (ETF) issuers will eventually be to disclose the underlying BTC on-chain address to compete with other issuers.

Publishing verifiable on-chain proofs of Bitcoin reserves is the best option for spot Bitcoin ETF issuers to validate their holdings, Jan3 CEO Samson Mou said. However, none of the existing 14 applicants have been working to provide evidence on-chain, Mou said in a December 28 interview with Cointelegraph.

Some cryptocurrency watchers have questioned the fundamental holdings of Bitcoin ETFs, with some executives suggesting that the Space Bitcoin ETF could create “millions of unbacked BTC.”

Experts such as Bloomberg ETF analyst Eric Balchunas have responded that it would be in the “best interest” of ETF issuers to hold actual bitcoins because not doing so could result in a loss of reputation and credibility.

According to Leah Wald, founder and CEO of Valkyrie, investors can verify that spot BTC ETF issuers are holding Bitcoin by regularly looking at publicly available records from ETF providers. “In theory, an equity ETF shouldn't be any different from holding shares of the equity names that we invest in through fund holdings,” Wald told Cointelegraph, adding that many regulators oversee the underlying asset holdings.

“For the more technical Bitcoiner, you can see the flow of funds on and off-chain,” said Valkyrie's CEO.

Regarding the question of spot Bitcoin ETF holdings, skeptics argue that such holdings cannot be verified until there is on-chain verification from issuers. However, some Bitcoin ETF applicants, such as Grayscale Investments, have previously refused to disclose addresses, citing security concerns.

“Due to security concerns, we do not make such on-chain wallet information and credentials publicly available through cryptographic authentication or other advanced cryptographic accounting processes,” Grayscale wrote on X (formerly Twitter) in November 2022.

Related: Spot Bitcoin ETFs Could ‘Destroy Bitcoin': Arthur Hayes

According to Mow, a scenario where an “unsupported” position would create a Bitcoin ETF could be hypothetical if the issuer violates the rules. he said:

“Technically, an ETF shouldn't be able to offer unbacked stocks because they're strictly regulated, but the rule doesn't necessarily mean issuers play by the rules.”

Although some issuers believe they may be playing by the rules, Mow believes transparency is one of the most important competitive aspects of the Bitcoin ETF space. Jan 3 CEO said:

“As the ETF arms race escalates, I believe we will see one or more funds identify themselves as the most transparent and reliable issuers.”

Securities regulators in the United States are widely expected to approve the first Bitcoin ETF in early January, with most analysts predicting January 10 as the date for the first approvals. Some ETF experts like Nate Geraci have predicted that Bitcoin ETF issuers will face “absolutely brutal” fee competition, as issuers such as Invesco and Galaxy waive fees for the first six months and the first $5 billion in assets.

According to Balchunas and fellow ETF analyst James Seifert, there is a 90% chance that the United States Securities and Exchange Commission will approve a Bitcoin ETF by January 10. More, they say, but that's only in cases where the regulator needs more time – they thought “a ten-year carpet”.

Magazine: Legislators' fear and skepticism fuel proposed crypto regulations in the US.