Georgetown Professor Urges SEC to Embrace In-Kind Creation Method for Spot Bitcoin ETFs
A finance professor at Georgetown University is urging the U.S. Securities and Exchange Commission (SEC) to reconsider its proposed cash-only rule for spot bitcoin exchange-traded funds (ETFs). In a letter addressed to the SEC, Professor James Angel argues that the in-kind creation method is a far superior option. He believes that the SEC should not impede the progress made in allowing spot bitcoin ETFs to trade in the U.S. by enforcing a suboptimal cash-only creation and redemption process.
Benefits of In-Kind Creation Method
Professor Angel highlights several advantages of the in-kind creation method in his letter to the SEC. He argues that this approach eliminates trading costs and execution risks for the ETF, ultimately benefiting the shareholders. With cash creation and redemption, the ETF and its shareholders bear the transaction costs associated with buying and selling bitcoin. These costs include bid-ask spreads and operational expenses. By adopting the in-kind model, ETF shareholders can avoid these unnecessary costs and reduce mispricing risks.
Additionally, the professor emphasizes that timing is crucial in the execution of creation and redemption processes. With the high volatility of bitcoin, there is a real risk of price fluctuations between the establishment of the net asset value (NAV) and the actual trading of bitcoin. By allowing in-kind creation and redemption, the SEC can mitigate this execution risk and protect shareholders from potential losses.
Support from ETF Sponsors
Professor Angel also highlights the support for the in-kind model from industry leaders such as Blackrock and Fidelity. Both companies have emphasized the advantages of the in-kind creation method, including lower transaction costs, resistance to market manipulation, and simplicity. Blackrock, in particular, has proposed a revised in-kind model for its spot bitcoin ETF. The professor contends that the SEC should take into account the expertise and experience of these ETF sponsors when considering the creation and redemption process.
The SEC's Role
In his letter, Professor Angel urges the SEC to refrain from micromanaging the creation and redemption process for spot bitcoin ETFs. He believes that ETF sponsors should have the freedom to accept bitcoin directly and that the SEC should trust their professional judgment. By doing so, the SEC can leverage the decades of experience and daily hands-on involvement of these sponsors in managing ETFs.
The Way Forward
Professor Angel concludes his letter by urging the SEC not to hinder the progress made in allowing spot bitcoin ETFs to trade in the U.S. He emphasizes that forcing a suboptimal cash-only creation and redemption process would be a missed opportunity. Instead, the SEC should embrace the in-kind model and empower ETF sponsors to make informed decisions that benefit both the ETF and its shareholders.
Have Your Say
Do you agree with Professor Angel's stance on the creation and redemption process for spot bitcoin ETFs? Share your thoughts and opinions in the comments section below.
Frequently Asked Questions
How much are gold IRA fees?
The Individual Retirement Account (IRA), fee is $6 per monthly. This includes the account maintenance fees and any investment costs associated with your chosen investments.
Diversifying your portfolio may require you to pay additional fees. The fees you pay will vary depending on the type of IRA that you choose. Some companies offer checking accounts for free, while others charge monthly fees for IRA account.
A majority of providers also charge annual administration fees. These fees range between 0% and 1 percent. The average rate is.25% annually. These rates are often waived if a broker like TD Ameritrade is used.
What is a Precious Metal IRA and How Can You Benefit From It?
An IRA with precious metals allows you to diversify retirement savings into gold and silver, palladium, rhodiums, iridiums, osmium, or other rare metals. These rare metals are often called “precious” as they are very difficult to find and highly valuable. They make excellent investments for your money and help you protect your future from inflation and economic instability.
Bullion is often used to refer to precious metals. Bullion is the physical metal.
You can buy bullion through various channels, including online retailers, large coin dealers, and some grocery stores.
An IRA for precious metals allows you to directly invest in bullion instead of purchasing stock shares. This ensures that you will receive dividends each and every year.
Precious Metal IRAs don’t require paperwork nor have annual fees. Instead, your gains are subject to a small tax. You also have unlimited access to your funds whenever and wherever you wish.
How is gold taxed in an IRA?
The tax on the sale of gold is based on its fair market value when sold. You don't have tax to pay when you buy or sell gold. It is not income. If you sell it later, you'll have a taxable gain if the price goes up.
As collateral for loans, gold is possible. Lenders seek to get the best return when you borrow against your assets. For gold, this means selling it. However, there is no guarantee that the lender would do this. They might just hold onto it. Or they might decide to resell it themselves. The bottom line is that you could lose potential profit in any case.
You should not lend against your gold if it is intended to be used as collateral. If you don't plan to use it as collateral, it is better to let it be.
Should You Buy or Sell Gold?
In times past, gold was considered a safe haven for investors in times of economic trouble. However, today many people are turning away from traditional investments such as stocks and bonds and instead looking toward precious metals such as gold.
Although gold prices have shown an upward trend in recent years, they are still relatively low when compared to other commodities like oil and silver.
Some experts think that this could change in the near future. They believe gold prices could increase dramatically if there is another global financial crises.
They also mention that gold is becoming more popular due to its perceived worth and potential return.
Here are some things to consider if you're considering investing in gold.
- First, consider whether or not you need the money you're saving for retirement. You can save money for retirement even if you don't invest in gold. Gold does offer an extra layer of protection for those who reach retirement age.
- You should also be aware of what you are getting into before you buy gold. There are many types of gold IRA accounts. Each offer varying degrees of security and flexibility.
- Last but not least, gold doesn't provide the same level security as a savings account. If you lose your gold coins, you may never recover them.
You should do your research before buying gold. And if you already own gold, ensure you're doing everything possible to protect it.
How much should precious metals be included in your portfolio?
To answer this question we need to first define precious metals. Precious metals have elements with an extremely high worth relative to other commodity. This makes them very valuable in terms of trading and investment. Gold is by far the most common precious metal traded today.
But, there are other types of precious metals available, including platinum and silver. The price of gold tends to fluctuate but generally stays at a reasonably stable level during periods of economic turmoil. It is not affected by inflation or deflation.
As a general rule, the prices for all precious metals tend to increase with the overall market. They do not always move in the same direction. If the economy is struggling, the gold price tends to rise, while the prices for other precious metals tends to fall. Investors expect lower interest rate, making bonds less appealing investments.
Contrary to this, when the economy performs well, the opposite happens. Investors favor safe assets like Treasury Bonds, and less precious metals. They become less expensive and have a lower value because they are limited.
Diversifying across precious metals is a great way to maximize your investment returns. Furthermore, because the price of precious Metals fluctuates, it is best not to focus on just one type of precious Metals.
Can I buy Gold with my Self-Directed IRA?
Although you can buy gold using your self-directed IRA account, you will need to open an account at a brokerage like TD Ameritrade. You can also transfer funds from an existing retirement fund.
The IRS allows individuals up to $5.500 annually ($6,500 if you are married and filing jointly). This can be contributed to a traditional IRA. Individuals are allowed to contribute $1,000 each ($2,000 if married or filing jointly) to a Roth IRA.
You should consider buying physical gold bullion if you decide to invest in it. Futures contract are financial instruments that depend on the gold price. These contracts allow you to speculate on future gold prices without actually owning it. But, physical bullion is real bars of gold or silver that you can hold in one's hand.
What Does Gold Do as an Investment Option?
The supply and demand for gold affect the price of gold. It is also affected negatively by interest rates.
Gold prices are volatile due to their limited supply. There is also a risk in owning gold, as you must store it somewhere.
Statistics
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
External Links
law.cornell.edu
- 7 U.S. Code SS7 – Designation of boards for trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement accounts
irs.gov
investopedia.com
cftc.gov
How To
Investing in gold or stocks
Gold investing as an investment vehicle can seem extremely risky these days. The reason behind this is that many people believe that gold is no longer profitable to invest in. This belief is due to the fact that many people see gold prices dropping because of the global economy. They fear that investing in gold will result in a loss of money. In reality, however there are still many significant benefits to gold investing. We'll be looking at some of these benefits below.
One of the oldest currencies known to man is gold. It has been used for thousands of years. It is a valuable store of value that has been used by many people throughout the world. It continues to be used in South Africa, as a way of paying their citizens.
The first point to consider when deciding whether or not you should invest in gold is what price you want to pay per gram. It is important to determine the price per gram you are willing and able to pay for gold bullion. You could contact a local jeweler to find out what their current market rate is.
Noting that gold prices have fallen in recent years, it is worth noting that the cost to produce gold has gone up. Although gold's price has fallen, its production costs have not.
It is important to keep in mind the amount you plan to purchase of gold when you're weighing whether or not it is worth your time. If you plan to buy enough gold to cover your wedding rings then it is probably a good idea to wait before buying any more. However, if you are planning on doing so for long-term investments, then it is worth considering. It is possible to make a profit by selling your gold at higher prices than when you purchased it.
We hope this article has given you an improved understanding of gold investment tools. We strongly recommend that you research all available options before making any decisions. Only after doing so can you make an informed decision.
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By: Kevin Helms
Title: Finance Professor Advocates for In-Kind Model for Spot Bitcoin ETFs, Criticizes SEC's Cash-Only Rule
Sourced From: news.bitcoin.com/finance-professor-blasts-secs-potential-cash-only-rule-for-spot-bitcoin-etfs-citing-benefits-of-in-kind-model/
Published Date: Sat, 16 Dec 2023 02:30:30 +0000
Did you miss our previous article…
https://altcoinirareview.com/the-potential-impact-of-u-s-money-market-growth-on-the-crypto-asset-market/
