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BlackRock and the SEC: What Was Discussed in Bitcoin ETF Meeting?

Last Updated November 23, 2023 2:54 PM
Josh Adams
Last Updated November 23, 2023 2:54 PM
Key Takeaways
  • The SEC is currently reviewing at least 10 applications for a spot Bitcoin ETF.
  • BlackRock was the first of this new round of applications.
  • This week, both parties met to discuss details.

In a significant development on November 20, officials from the U.S. The Securities and Exchange Commission’s (SEC) Division of Trading and Markets met representatives from BlackRock, the world’s largest asset manager to discuss its anticipated spot Bitcoin exchange-traded fund (ETF).

BlackRock, along with several other firms, are currently waiting for the SEC to approve their application.

Talks Progressing On A Spot Bitcoin ETF

The participants included SEC officials David Shillman, Tom McGowan, Randall Roy, Ray Lombardo, Molly Kim, Edward Cho, Sarah Schandler, and Stacia Sowerby. From BlackRock, attendees comprised Rachel Aguirre, Adithya Attawar, Shannon Ghia, Robert Mitchnick, Charles Park, Marisa Rolland, and Ben Tecmire. 

Representatives from NASDAQ included Eun Ah Choi, Jonathan Cayne, Giang Bui, and Ali Doyle.

According to the memo , the meeting focused on the NASDAQ Stock Market’s proposed rule change under NASDAQ Rule 5711(d) , specifically addressing the listing and trading of BlackRock’s proposed spot Bitcoin ETF — the iShares Bitcoin Trust.

In October, industry observers noted that BlackRock’s anticipated iShares Bitcoin Trust has been officially listed on the Depository Trust and Clearing Corporation (DTCC) website. The designated ticker for this forthcoming fund is IBTC. 

Senior analyst Eric Balchunas from Bloomberg Intelligence remarked that IBTC stands out as the very first proposed spot bitcoin Exchange-Traded Fund (ETF) to be featured on DTCC.

Spot Bitcoin ETF: In-Kind vs Cash Redemption?

BlackRock also provided a presentation during the session, which compares two redemption models for the proposed ETF. According to presentation, the asset manager appears to prefer an in-kind redemption.

With in-kind redemption, investors redeem shares, and instead of receiving cash, they are given securities or other forms of property from the fund’s holdings on a pro-rata basis. This mechanism, particularly prevalent in ETFs, is designed to maximize tax efficiency by avoiding the need for the fund to sell securities to generate cash.

This minimizes capital gains distributions and provides tax advantages for both redeeming and non-redeeming shareholders.

This set up “makes sense,” according to  Bloomberg Research Analyst, James Seyffart. “[It’s] probably cleanest structure for them & end investors.”

Alongside BlackRock, Grayscale have also recently met with the SEC  on their ETF application. According to financial lawyer Scott Johnsson , Grayscale are also pushing for an in-kind redemption, according to their 8-k filing .

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