In the latest update to its bitcoin ETF application, BlackRock has committed to paying redemptions in cash, for now. Photo by Erik McGregor/LightRocket via Getty Images.
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Key Takeaways
BlackRock and the SEC have held meetings in recent weeks to discuss how the firm’s proposed Bitcoin ETF intends to issue redemptions.
The fund manager had pushed for an “in-like” model that would see shares redeemed for Bitcoin but has ultimately come around to the SEC’s demand for cash redemptions.
However, Blackrock’s amended filing suggests it hasn’t fully given up on the idea of in-like redemptions.
With the Securities and Exchange Commission seemingly primed to approve the first spot Bitcoin Exchange-Traded Funds (ETF) soon, Blackrock has held a series of meetings with the regulator to discuss how ETF shares will be redeemed. (Or rather, because ETF shares aren’t redeemed individually, how “baskets” of shares will be redeemed.)
Having initially pushed for ETF baskets to be redeemable “in-like,” Blackrock’s latest SEC filing has bowed to the agency’s preference for cash redemptions. However, it hasn’t completely abandoned the prospect of paying investors in BTC.
Cash vs. Crypto Redemptions
BlackRock has argued that redeeming ETF shares for Bitcoin is more efficient than issuing redemptions in dollars.
While most firms initially proposed crypto redemptions, according to Bloomberg ETF analyst Erich Balchanus, the SEC asked them to amend their applications to incorporate a cash redemptions model in line with traditional ETFs.
Spearheading efforts to lobby for Bitcoin payouts, BlackRock met with the SEC several times to discuss the issue of cash versus in-like redemptions. However, the regulator resisted on the grounds that the Bitcoin redemption process could negatively affect US-registered broker/dealers’ balance sheets.
BlackRock’s revised model for Bitcoin redemptions. Source: SEC.
In a bid to address the SEC’s concerns, the fund manager proposed introducing an extra step in the redemption process. This could ensure the broker’s liabilities wouldn’t outweigh its assets at any stage. However, the proposed change failed to appease the regulator.
BlackRock Backs Down, for Now
Despite Blackrock’s push for in-like redemptions, the firm committed to an orthodox cash redemptions model in its latest SEC filing.
It said: “The Trust issues and redeems baskets on a continuous basis. These transactions will take place in exchange for cash.”
BlackRock’s proposed spot Bitcoin ETF trades under the ticker IBIT in an amended S-1 filing with the SEC on Monday. The revised document also adds new content on the creation and redemption mechanisms proposed for the fund. This was the subject of discussion during a recent…
BlackRock has kept open the possibility of changing the process to make baskets redeemable in crypto at a later date. The document adds that “subject to the In-Kind Regulatory Approval, these transactions may also take place in exchange for Bitcoin”. This suggests the SEC may not have entirely ruled it out.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
