Blackrock Advocates for In-Kind Creation Model
Blackrock, the largest asset manager globally, has reportedly expressed its preference for the in-kind creation method for its proposed bitcoin exchange-traded fund (ETF), diverging from the cash creation model favored by the U.S. Securities and Exchange Commission (SEC). According to reports, Blackrock and other applicants for spot bitcoin ETFs recently held discussions with the SEC.
SEC Meets with Blackrock
This week, the U.S. Securities and Exchange Commission (SEC) apparently met with Blackrock to discuss the asset manager’s application for a spot Bitcoin ETF. Bloomberg research analyst James Seyffart shared insights on social media platform X, revealing that Grayscale Investments has also engaged with the SEC regarding its bid to convert its bitcoin trust into a spot bitcoin ETF.
In-Kind vs. Cash Creation
Blackrock’s preference for in-kind creation is evident from slides posted by Seyffart. In in-kind creation, ETF units are exchanged for assets instead of cash. This structure is considered cleaner and more favorable for both Blackrock and end investors. On the other hand, cash creation involves authorized participants providing cash in exchange for new ETF units.
Better Option for Investors
Bloomberg senior ETF analyst Eric Balchunas highlighted that both Blackrock and Ark Invest are firm supporters of in-kind creation. This method is believed to offer better spreads and tax benefits for investors. However, there are reports that the SEC has requested ETF issuers to use cash creates to prevent unregistered brokers from participating in the first batch of spot bitcoin ETFs.
SEC Advises Cash Creates
Last week, Balchunas revealed that the SEC’s Division of Trading and Markets has advised exchanges to use the cash-create method for their spot bitcoin ETFs. The regulator has reportedly asked ETF issuers to amend their filings accordingly within the next couple of weeks.
Approval of Multiple Spot Bitcoin ETFs Expected
SEC Chair Gary Gensler disclosed that the regulator is currently considering eight to ten spot bitcoin ETF applications. Analysts, including those at JPMorgan, anticipate that the SEC will approve multiple spot bitcoin ETFs simultaneously in early 2022.
Hot Take: Blackrock Pushes for In-Kind Creation Model for Bitcoin ETF
Blackrock, the world’s largest asset manager, has met with the SEC to discuss its application for a spot Bitcoin exchange-traded fund (ETF). The company prefers the in-kind creation method over cash creation, which is favored by the SEC. In-kind creation involves exchanging assets for ETF units, while cash creation requires authorized participants to provide cash in exchange for new units. Blackrock’s preference aligns with other firms like Ark Invest and offers benefits in terms of spreads and taxes. However, there are reports that the SEC has advised issuers to use cash creates instead. The SEC is currently reviewing several spot Bitcoin ETF applications and may approve multiple ones early next year.
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