According to James Seyffart, an ETF analyst at Bloomberg, BlackRock recently met with US SEC regulators regarding its spot Bitcoin ETF application.
Reports have been that the US Securities and Exchange Commission is in talks with exchanges on the much-anticipated release of a spot Bitcoin exchange-traded fund. The main topic of discussion is the decision between the “in-kind” redemption model and the cash model summary for the upcoming ETF launch.
According to popular analyst Eric Balchunas, “Hearing chatter SEC’s Trading & Markets engaged with exchanges this week on spot bitcoin ETF 19b-4s, is advising them they’d like the ETFs to do cash creates (vs in-kind), and has asked them to get in amendments in next couple weeks.”
Seyffart highlighted that BlackRock, a well-known asset management company, appears to favor “in-kind” over “cash create” for its iShares Bitcoin Trust ETF in a recent tweet.
The analyst is confident that BlackRock would be better off going with this choice because it likely offers the most straightforward structure for the asset manager and its final investors.
He provided a screenshot of a document created by BlackRock in which the company distinguished between the two redemption models. The In-kind approach will only need five steps, beginning with the Market Marker (MM) contacting an Authorized Participant (AP) to place the redemption order.
Subsequently, the Market Maker purchases the ETF shares via a Listing Exchange after the ETF issuer accepts the order. The market marker will deliver the ETF share to a Transfer Agent.
This occurs after the Bitcoin custodian may have received instructions from the ETF issuer to release the coin to the Market Maker.
Overview of Bitcoin ETF Cash Model
When using the cash model, the ETF issuer must first provide the Bitcoin custodian instructions to remove the currency from cold storage before it can be sold.
Market Makers can exchange BTC for USD by entering into a deal with the ETF provider. In contrast to BlackRock, some applicants want the “cash create” option since it would lessen the limitations imposed on broker-dealers.
In the meantime, Grayscale has disclosed that it has executed a Transfer Agency and Service Agreement with BNY Mellon for its spot Bitcoin ETF and has also been in discussions with the commission. Investors now have higher expectations on the possible approval of a spot Bitcoin ETF due to these meetings with the SEC.
