BlackRock’s Bitcoin ETF: Regulatory Concessions & Redemptions Update

BlackRock’s Bitcoin ETF Adaptation

BlackRock, in its latest filing, embraces a cash redemption model for its Bitcoin ETF, yielding to SEC demands amid ongoing discussions on ETF share creation.

In the revised S-1 form submitted on Monday, BlackRock has disclosed significant alterations in its approach to how shares in its proposed Bitcoin fund would mirror the digital asset’s price movements.

Evolution of ETF Redemption Models

The asset manager’s move to a cash-creation system follows similar adjustments made by competing ETF applicants like ARK Invest and 21Shares, whose filings also reflected a shift toward cash-based creations, marking a departure from the preferred “in-kind” redemptions involving Bitcoin.

Also Read: Ethereum ETF Approvals Postponed: SEC’s Decision Deferred To Late May 2024

SEC’s Stance and Industry Dynamics

BlackRock, Grayscale, and other applicants have engaged in discussions with SEC officials, trying to navigate the best approach for ETF share redemption. While the in-kind model is deemed more efficient for asset managers, the SEC has voiced concerns over potential risks associated with broker-dealers managing Bitcoin-based redemptions.

Bitcoin ETF Landscape and Anticipated Approvals

Despite the alteration in BlackRock’s filing, the cash redemption model still necessitates Coinbase, the fund’s custodian, to hold actual BTC, offering an improvement over existing Bitcoin futures ETFs.

The regulatory pushback against spot ETFs seems to be evolving following the recent Grayscale court case, with expectations of multiple ETF approvals next month. However, doubts persist regarding the inclusion of Grayscale Bitcoin Trust (GBTC) in the initial wave of approvals, as per analysts’ insights into ongoing filings like WisdomTree’s Bitcoin ETF proposal.