Several potential issuers of spot Bitcoin exchange-traded funds (ETFs) may need to reveal their on-chain addresses for the underlying BTC holdings to remain competitive, according to industry activist Samson Mow, CEO of Jan3.
While the approval of spot Bitcoin ETFs is eagerly anticipated in the United States, concerns have arisen regarding the transparency and verification of these ETFs.
Mow suggests that providing verifiable on-chain proof of Bitcoin reserves would be the optimal way for spot Bitcoin ETF issuers to ensure the legitimacy of their holdings.
Surprisingly, none of the 14 existing applicants for these ETFs have taken steps to offer on-chain proofs, Mow noted in an interview with Cointelegraph.
Skepticism has arisen among cryptocurrency observers regarding the holdings of spot Bitcoin ETFs, with some fearing that they may create “millions of unbacked BTC.”
Bloomberg ETF analyst Eric Balchunas emphasized that holding actual Bitcoin is in the best interest of ETF issuers to maintain their reputation and trustworthiness.
READ MORE: Data Suggests Limited Impact on Bitcoin Prices Despite SEC ETF Approval Speculation
Leah Wald, co-founder and CEO of Valkyrie, suggests that investors can verify whether spot BTC ETF issuers truly hold Bitcoin by reviewing publicly available records from the ETF provider, similar to verifying equity ETF holdings.
Regulators will also monitor the underlying asset holdings, ensuring a level of transparency.
However, some spot Bitcoin ETF applicants, like Grayscale Investments, have refused to disclose addresses due to security concerns.
Mow acknowledges that there’s a hypothetical possibility of an issuer creating an “unbacked” spot Bitcoin ETF if they violate the rules, even though regulations are in place to prevent this.
Despite potential rule violations, Mow believes that transparency will be a crucial competitive aspect in the spot Bitcoin ETF race.
As the competition escalates, he anticipates that one or more funds may disclose their addresses to establish themselves as transparent and reliable issuers.
The United States Securities and Exchange Commission is expected to approve the first spot Bitcoin ETFs in early January, with many analysts targeting January 10 as the approval date.
However, there’s also anticipation of fierce fee competition among ETF issuers, with some, like Invesco and Galaxy, waiving fees for the first six months and for the first $5 billion in assets.
According to ETF analysts Balchunas and Seyffart, there’s a 90% chance of the SEC approving a spot Bitcoin ETF by January 10, though a rejection remains possible if the regulator requires more time for consideration, an event they describe as the “rug pull of a decade.”
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