Blackrock’s Revised In-Kind Model for Spot Bitcoin ETF
Blackrock, the world’s largest asset manager, has engaged in another meeting with the U.S. Securities and Exchange Commission (SEC) regarding its spot bitcoin exchange-traded fund (ETF) application. The discussion centered around Nasdaq’s proposed rule change for listing and trading shares of the iShares Bitcoin Trust. During the meeting, the SEC expressed concerns about the balance sheet impacts and risks associated with Blackrock’s in-kind model.
The Proposal: A Revised In-Kind Model
In response to the SEC’s concerns, Blackrock has put forth a revised in-kind model, also known as a prepay model. The firm believes that this model addresses the SEC’s concerns and offers several benefits to investors, including lower transaction costs, reduced execution risks, resistance to market manipulation, and operational event risks. Blackrock argues that the in-kind model is preferable over cash models for spot bitcoin ETFs.
Favoring the Cash Model
While Blackrock advocates for the in-kind model, the SEC reportedly leans towards the cash-create approach for spot bitcoin ETFs. Bloomberg ETF analyst Eric Balchunas revealed that the SEC’s Division of Trading and Markets has advised exchanges to opt for the cash method. Despite this, Blackrock maintains its position on using the in-kind creation model.
SEC’s Consideration of Multiple Spot Bitcoin ETF Applications
Last month, SEC Chair Gary Gensler disclosed that the regulator is evaluating eight to ten spot bitcoin ETF applications. Speculation suggests that the SEC may approve several spot bitcoin ETFs simultaneously in early 2022.
Hot Take: Blackrock Proposes Revised In-Kind Model for Spot Bitcoin ETF
Blackrock has presented a revised in-kind model to address the SEC’s concerns and increase its chances of securing approval for its spot bitcoin ETF application. The asset manager argues that the in-kind model offers numerous advantages to investors, including lower costs and resistance to market manipulation. However, the SEC leans towards the cash-create model, prompting exchanges to consider this approach for spot bitcoin ETFs. The decision ultimately lies with the SEC, which is currently evaluating multiple spot bitcoin ETF applications and may approve several in the near future. Investors await further developments in the regulatory landscape to determine the fate of spot bitcoin ETFs.
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