BlackRock has revised its spot Bitcoin (BTC) exchange-traded fund (ETF) application to make it easier for Wall Street banks to participate by creating new shares in the fund with cash, rather than just crypto.
The new in-kind redemption “prepay” model, will allow banking giants such as JPMorgan or Goldman Sachs to act as authorized participants for the fund — allowing them to circumvent restrictions that prevent them from holding Bitcoin or crypto directly on their balance sheets.
The new model was presented by six members of BlackRock and three from NASDAQ in a Nov. 28 meeting with the United States Securities Exchange Commission.
If approved, the move could be a game-changer for Wall Street banks with trillion-dollar balance sheets looking to get involved, as many highly regulated banks aren’t able to hold Bitcoin themselves.
Under the revised model, APs would transfer cash to a broker-dealer, which then converts the cash into Bitcoin before it is stored by the ETF’s custody provider, which is Coinbase Custody in BlackRock’s case.
The new structure also works by shifting risk away from APs and placing it more in the hands of market makers.
BlackRock said the new model also offers “superior resistance to market manipulation” — which has been one of the primary reasons that the SEC has repeatedly denied all prior spot Bitcoin ETF applications.
Additionally, BlackRock claimed the new ETF structure would strengthen investor protections, lower transaction costs, and increase “simplicity and harmonization” across the wider Bitcoin ETF ecosystem.
BlackRock meets with SEC for the third time
More recently, BlackRock has met with the Gary Gensler-led SEC for the third time on Dec. 11, according to a recent SEC filing.
Damn, the SEC is busier than Santa’s elves. BlackRock’s third meeting with them yesterday is the most notable IMO as everyone is waiting to see if they can convince SEC to allow in-kind creations in the first run of approvals. https://t.co/r2jqgpg87m
— Eric Balchunas (@EricBalchunas) December 12, 2023
BlackRock and NASDAQ’s second meeting with the SEC on Nov. 28 meeting was a follow-up from its first meeting with the securities regulator on Nov. 20, where it presented its original in-kind redemption model.
The SEC must make a decision on BlackRock’s application by Jan. 15, with the final deadline scheduled for March 15.
Meanwhile, ETF analysts predict the SEC will issue a decision on several pending spot Bitcoin ETF applicants sometime between Jan. 5-10.
Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, and Hashdex are among the other financial firms that await a decision by the SEC between those dates.