This Might Be the Last Hurdle for Bitcoin ETF Approval

As the clock ticks down to the January deadline for the Securities and Exchange Commission to approve, deny, or delay its decision on spot Bitcoin ETFs, there’s one last hurdle for potential issuers: Authorized participants.

Bloomberg Intelligence analyst Eric Balchunas predicted that each Bitcoin ETF hopeful will need to have explicit authorized participant parameters in its S-1 before it’s considered for approval.

The authorized participant wrinkle appears to be another attempt by the SEC to very explicitly spell out who can and who cannot be involved in the creation and redemption of Bitcoin ETF shares—and by extension, who can directly handle BTC.

And generally speaking, the more authorized participants there are for an ETF, the more liquidity there is. When there’s a shortage of shares on the market, authorized participants can create more. And when there’s too many shares of the ETF on the market, authorized participants can reduce the number of shares available. In both instances, the extra participants help keep an ETF’s share price in line with its underlying asset—in this case, that’s Bitcoin.