- Goldman Sachs is in talks to become an authorized participant
- APs set up and redeem ETF shares to ensure products trade in line with underlying assets
Leading investment bank Goldman Sachs is likely to play a critical role in the Bitcoin exchange-traded funds (ETFs) that Grayscale and BlackRock want to launch in the US, insiders told CoinDesk. The bank is in negotiations to become an authorized participant (AP) for the ETFs. This is a crucial role in the highly lucrative ETF industry, which involves setting up and redeeming ETF shares to make sure the products trade in line with the assets underpinning them.
JPMorgan Chase could also take on the role
Goldman Sachs is not the only finance titan likely to take on the role of AP. Leading news sources recently reported that JPMorgan Chase, Cantor Fitzgerald, and Jane Street would take on the role for some of the companies who have applied with the US Securities and Exchange Commission (SEC) to set up Bitcoin ETFs in the country.
Each ETF can have 10 APs
As each Bitcoin ETF can have as many as 10 APs, many more names are likely to emerge.
Leading US banks typically avoid direct interaction with cryptocurrencies due to the latter’s volatile nature. However, a cash-based mechanism has been adopted to deal with the Bitcoin underlying the ETF shares, without which SEC approval would be highly unlikely. This is why the banks are vested in the highly anticipated approval of the first Bitcoin ETF in the US.
Major players have a vested interest
Goldman Sachs is seeking to partner with major industry players. Grayscale’s Bitcoin Trust, which is worth $26 billion, is the largest Bitcoin investment platform in the world. In turn, BlackRock is the biggest asset manager worldwide. They recently overhauled their ETF model to improve their prospects of approval.
A big win for crypto
The SEC rejected Grayscale’s application to convert its Bitcoin Trust into an ETF and the latter promptly appealed. The US appeals court ruled that the SEC acted arbitrarily in rejecting the application in what was a landmark victory for the crypto industry.
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