The Call for In-Kind Creation
A finance professor from Georgetown University has recently urged the U.S. Securities and Exchange Commission (SEC) to avoid micromanaging the creation and redemption process for spot bitcoin exchange-traded funds (ETFs). In a letter penned to the SEC, the professor emphasized the importance of adopting the in-kind creation method instead of the cash creation method proposed by the SEC.
The Need for Freedom of Choice
The professor expressed concerns over the possibility of the SEC allowing only cash creation and redemption for bitcoin ETFs. According to the professor, this restriction would limit the freedom of issuers and authorized participants (APs) to choose whether to create or redeem in-kind. This limitation would result in higher costs, wider bid-ask spreads, and potential mispricing of ETFs in relation to the spot price of bitcoin. Allowing in-kind creation and redemption, on the other hand, eliminates trading costs and execution risks for the ETF, benefiting both shareholders and investors.
The Advantages of In-Kind Creation
The professor highlighted the numerous advantages of in-kind creation and redemption. With this method, ETFs can avoid transaction costs associated with buying and selling bitcoin. Additionally, bid-ask spreads and operational costs can be minimized by not having to build a competent trading capacity in bitcoin. Timing costs, which arise from the risk of bitcoin price fluctuations between the establishment of the net asset value (NAV) and the actual trading of bitcoin, can also be mitigated. In the context of bitcoin's high volatility, eliminating execution risk is crucial for providing a more stable investment environment.
The Role of ETF Sponsors
According to the professor, the SEC should listen to the ETF sponsors who possess extensive experience in creating and redeeming ETFs. Micromanaging the creation and redemption process would hinder the professional judgment of these sponsors. Both Blackrock and Fidelity, two prominent financial institutions, have recognized the advantages of the in-kind model, such as lower transaction costs, resistance to market manipulation, and simplicity.
Seizing the Opportunity
The professor concluded by emphasizing that the SEC should not jeopardize the positive development of allowing spot bitcoin ETFs to trade in the U.S. by enforcing a suboptimal product that only allows cash creation and redemption. By embracing the in-kind creation method, the SEC can ensure a more efficient and investor-friendly environment for bitcoin ETFs.
What are your thoughts on this matter? Share your opinion in the comments section below.
Frequently Asked Questions
What are the pros and cons of a gold IRA?
A gold IRA is an excellent investment vehicle for those who want to diversify their holdings but don't have access to traditional banking services. It allows you to invest freely in precious metals, such as gold, silver and platinum until they are withdrawn.
The downside is that withdrawing money early will pay ordinary income tax on the earnings. However, creditors will not be able to seize these funds if you default on your loan.
A gold IRA could be the best option for you if your goal is to have gold that you can own without worrying about taxes.
Which is better: sterling silver or 14k-gold?
Sterling silver, which contains 92% pure sterling silver instead of just 24%, is a stronger metal than gold or silver.
Sterling silver is sometimes called fine silver. This is because it is made with a mix of silver and different metals like copper or zinc.
It is generally believed that gold is very strong. It takes a lot of pressure to break it down. If you drop something on top of a chunk of gold it will shatter into thousands of pieces rather than breaking into two halves.
Silver isn't nearly as strong as either gold or silver. If you dropped an item onto a sheet of silver, it would probably bend and fold without shattering.
It is commonly used in coins and jewelry. Its value fluctuates based on demand and supply.
Should You Open a Precious Metal IRA?
Answers will depend on whether you have an investment goal or how high you are willing and able to tolerate risk.
Open an account today if your retirement plan calls for you to withdraw the funds.
The reason is that precious metals are likely to appreciate over time. They also offer diversification benefits.
Additionally, silver and Gold prices tends to move together. They are therefore a better option for investing in both assets.
Do not invest in precious metals IRAs if your goal is to save money or take on any risk.
What is a Precious Metal IRA and How Can You Benefit From It?
Precious Metals are a great way to invest in retirement funds. They have been around for centuries and are still very valuable today. It is a great way of diversifying your portfolio and protecting against inflation by investing in precious metals like gold, silver, or platinum.
Some countries also allow citizens to keep their money in foreign currency. You can buy gold bars in Canada and keep them at home. Then, you can buy gold bars in Canada and sell them for Canadian dollars when your family is home.
This is a great way to invest in precious metals. It's especially useful if you live outside of North America.
Are silver and gold IRAs a good idea for you?
This could be a great opportunity for those who want to easily invest in both gold or silver simultaneously. But there are other options. You can contact us at any time with questions about these types investments. We are always here to help!
Statistics
- SEP-IRA”Simplified employee pension” For self-employed people like independent contractors, freelancers, and small-business ownersSame tax rules as traditional IRASEP IRA contributions in 2022 are limited to 25% of compensation or $66,000, whichever is less4. (sltrib.com)
- Same tax rules as traditional IRA SEP IRA contributions in 2022 are limited to 25% of compensation or $66,000, whichever is less Before setting up a Silver IRA, understand the fees and IRS restrictions. (sltrib.com)
- To qualify as IRA allowable precious metals and be accepted by STRATA, the following minimum fineness requirements must be met: Gold must be 99.5% pure, silver must be 99.9% pure, and platinum and palladium must both be 99.95% pure. (stratatrust.com)
- You can only purchase gold bars of at least 99.5% purity. (forbes.com)
External Links
investopedia.com
wsj.com
takemetothesite.com
en.wikipedia.org
How To
How to Buy Gold For Your Gold IRA
Precious metal can be used to refer to gold, silver or platinum as well as osmium and ruthenium. It can be any element naturally occurring between atomic numbers 7 and 110 (excluding the helium). This is valuable due to its beauty and rarity. The most common precious metals are gold and silver. Precious metals can be used to make money, jewelry, industrial products, and art objects.
Due to supply and demand, the price of gold fluctuates every day. There has been a significant demand for precious metals over the past decade as investors look for safe havens in unstable economies. This has resulted in a substantial rise in the prices. However, some are hesitant to invest in precious metals because of the rising costs of production.
Because gold is rare and durable, it makes a good investment. Gold never loses its value, unlike other investments. Gold can be bought and sold without tax. There are two ways that you can invest your gold. There are two ways to invest in gold: buy gold bars and coins; or, you can invest directly in gold futures.
Physical gold coins and bars provide immediate liquidity. They're easy to trade and store. They aren't very effective in protecting against inflation. You can protect yourself against rising prices by purchasing gold bullion. Bullion is physical, or pure gold. Some billions come in one-ounce pieces, while others come in larger sizes like kilo bars. Bullion is usually stored in vaults protected from theft and fire.
Buy gold futures to own shares and not actual gold. Futures let investors speculate on the future price of gold. You can buy gold futures and get exposed to the price of gold without actually owning it.
For instance, if my goal was to speculate on the movement of the gold price, I could purchase a contract. My position at the expiration of the contract will be either “long-term” or “short-term.” A long contract means I believe the gold price will rise, so I am willing to hand over money now in return for the promise of more money when the contract expires. A short contract, on the other hand, means I believe the price of gold is going to drop. In exchange for making less money in the future, I am willing to accept the money now.
When the contract expires, I'll receive the amount of gold specified in the contract plus interest. By doing this, I can get exposure to the market price for gold without actually owning it.
Precious metals are great investments because they're extremely hard to counterfeit. Paper currencies can be easily faked by printing new bills. Precious metals are not easy to counterfeit. It is because precious metals are hardier than paper currencies that they can be counterfeited by printing new bills.
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