BlackRock Holds Meeting with SEC to Discuss Bitcoin ETF
BlackRock executives recently met with the Securities and Exchange Commission (SEC) to discuss their application for a Bitcoin spot ETF in the US. The asset manager has made modifications to its ETF blueprint in order to find a compromise with the SEC. The main point of contention was the redemption model for Bitcoin.
BlackRock’s Original Redemption Model
Initially, BlackRock proposed an “in-kind” redemption model, which involved a six-step process where market makers adjust the supply of ETF shares and redeem them directly for BTC. However, the SEC expressed concerns about this model due to potential balance sheet risks.
BlackRock’s Revised Redemption Model
In response to the SEC’s concerns, BlackRock has revised its redemption model. The new model keeps redemptions in-kind but adds an additional step: the offshore entity of the market maker pre-pays its US-based broker dealer with cash before redeeming ETF shares for Bitcoin. BlackRock argues that this model preserves the benefits of in-kind redemptions while addressing the SEC’s concerns.
Predictions and Other Applicants
Bloomberg ETF analyst Eric Balchunas predicts that several Bitcoin ETF applicants are following the SEC’s guidance for a cash-creation model. Despite ongoing negotiations, Balchunas maintains his previous prediction that a Bitcoin ETF has a 90% chance of approval by January 10. Hashdex, another ETF applicant, also had a meeting with the SEC recently.
Hot Take: BlackRock Revises Bitcoin ETF Model To Address SEC Concerns
BlackRock has modified its proposed redemption model for a Bitcoin spot ETF in response to concerns raised by the Securities and Exchange Commission (SEC). The revised model keeps redemptions in-kind but adds an extra step involving the pre-payment of cash by the offshore entity of the market maker to its US-based broker dealer. BlackRock argues that this compromise maintains the benefits of in-kind redemptions while addressing the SEC’s concerns. Bloomberg ETF analyst Eric Balchunas predicts that multiple Bitcoin ETF applicants are following the SEC’s guidance for a cash-creation model. Despite ongoing negotiations, Balchunas maintains his previous prediction that a Bitcoin ETF has a high chance of approval by January 10.
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