What to Know:
- DTCC listing is a routine update, not ETF approval.
- Two SEC approvals (19b-4 and S-1) are needed for an ETF launch.
- LINK ETF could broaden crypto exposure but has trade-offs.
The recent buzz around Chainlink (LINK) being listed on the DTCC reference list ignited speculation about a potential LINK ETF. While this listing indicates operational readiness for a possible ETF, it’s crucial to understand that it doesn’t equate to SEC approval. Like XRP and Bitcoin before it, this is merely a step in the process, not the finish line.
The SEC requires two main approvals before a crypto ETF can launch: a 19b-4 filing approval for the exchange and an S-1 registration statement for the issuer. These filings ensure market surveillance and transparency, addressing concerns about manipulation and providing detailed fund information. Meeting these requirements remains a challenge for tokens like LINK, requiring exchanges to demonstrate liquidity and price reliability.
DTCC tickers may cause excitement, but they are only a step in the ETF process. The process only concludes when both of the SEC’s approvals, 19b-4 and S-1, are officially granted.
If a LINK ETF eventually gains approval, it could significantly broaden access to digital assets for both crypto natives and traditional investors. This would allow buying LINK through standard brokerage accounts, simplifying tax reporting and eliminating the need for wallet setups or seed phrases. However, investors should consider management fees, tracking differences, and the lack of direct participation in DeFi or governance.
The mechanics of ETF operations, including authorized participants and market makers, are crucial for maintaining price alignment. For LINK, its thinner markets mean large ETF creations or redemptions could impact prices and DeFi liquidity. The SEC closely reviews custody and creation-redemption processes to mitigate these risks, especially if the ETF involves staking.
Source: Original article
