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BlackRock Files Revised Spot Bitcoin ETF Proposal

BlackRock Files Revised Spot Bitcoin ETF Proposal

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The world’s largest asset manager, BlackRock, has filed an updated spot Bitcoin exchange-traded fund (ETF) as anticipation of a rumored SEC approval builds. 

The revised ETF proposal was filed in a bid to appease the SEC and in the hope of boosting the chances of securing a first-of-its-kind spot Bitcoin ETF approval in the US. 

BlackRock Files Updated Proposal 

The updated proposal states that BlackRock’s ETF will feature cash creation and redemption mechanisms that the Securities and Exchange Commission favors. BlackRock had initially applied for its iShares Blockchain and Tech ETF last month and had proposed an in-kind redemption model. However, after scrutinizing BlackRock’s proposal, the Securities and Exchange Commission raised concerns about investor safety and market manipulation. 

Generally, ETFs feature one of two types of redemption and creation mechanisms: in-kind and cash. Under an in-kind redemption structure, firms can redeem shares for Bitcoin held by their ETFs. According to many firms, this redemption structure is more appealing to investors. Cash redemptions, which the Securities and Exchange Commission views as the safer and more accessible redemption option, replace the shares with their equivalent cash value. 

BlackRock is the latest among several other applicants that have updated their proposal for a spot Bitcoin ETF. The revised applications have been filed as speculation grows that the Securities and Exchange Commission could approve a bunch of spot Bitcoin ETF applications as soon as January 2024. 

Firms Agreeing To SEC Line? 

Apart from BlackRock, Valkyrie, Galaxy Digital, Invesco, and several other applicants have updated their filings for their respective ETFs. The Securities and Exchange Commission has consistently maintained it prefers cash redemptions instead of the in-kind redemptions. BlackRock’s updated filing indicates that the asset manager has agreed to the SEC’s demand to exclude in-kind creations and redemptions for its Bitcoin ETF, at least initially. BlackRock stated in its updated filing, 

“These transactions will take place in exchange for cash. Subject to the In-Kind Regulatory Approval, these transactions may also take place in exchange for bitcoin.”

However, the amended filing indicates that BlackRock hopes to facilitate in-kind creations at some point, depending on regulatory approvals. The SEC had reportedly advised firms that had applied for a Bitcoin ETF to switch to cash creations instead of in-kind. In its initial filing, BlackRock used an in-kind model and demonstrated how it could work in a meeting with SEC officials. According to BlackRock, an in-kind model has several benefits, including tax efficiency. 

A Positive Development 

BlackRock’s decision to agree with the SEC’s view and prioritize cash creations in its updated filing is being viewed as a positive sign as anticipation around the approval builds. Following BlackRock, WisdomTree also submitted an updated filing. BlackRock’s move also indicates a shift in strategy by the asset manager. Meanwhile, the positive developments surrounding the Bitcoin ETF applications and the possibility that the applicants and the SEC are on the same page had an impact on the markets as well. 

Bitcoin registered a price increase of over 5.5%, which saw the cryptocurrency jump past the $43,000 mark. In fact, the cryptocurrency added over $50 billion to its market cap in the past 25 hours. Bitcoin is currently trading at $42,981, according to data from CoinMarketCap.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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