BlackRock has revamped its spot Bitcoin (BTC) exchange-traded fund (ETF) application to make it easier for Wall Street banks to participate by creating new fund shares with cash, not just crypto.
The new “prepaid” in-kind buyback model will allow banking giants such as JPMorgan or Goldman Sachs to act as authorized participants for the fund – thereby bypassing restrictions that prevent them from allocating Bitcoin or cryptocurrencies directly to their balance sheets hold.
The new model was presented on November 28 by six members from BlackRock and three from NASDAQ at a meeting with the US Securities Exchange Commission.
If approved, the move could be crucial for Wall Street banks with trillion-dollar balance sheets looking to participate, as many heavily regulated banks are unable to hold Bitcoin themselves.
Under the revised model, APs would transfer cash to a broker-dealer, which would then convert the cash into Bitcoin before storing it with the ETF's custody provider, in the case of BlackRock, Coinbase Custody.
The new structure also works by shifting risk away from the APs and placing it more in the hands of market makers.
BlackRock's revised redemption model was presented to the SEC on November 28th. Source: SEC
BlackRock said the new model also offers “superior resistance to market manipulation” – which is one of the main reasons the SEC has repeatedly rejected all previous spot Bitcoin ETF applications.
Additionally, BlackRock claimed that the new ETF structure would strengthen investor protection, reduce transaction costs, and increase “simplicity and harmonization” across the Bitcoin ETF ecosystem.
BlackRock is meeting with the SEC for the third time
According to a recent SEC filing, BlackRock met with the SEC led by Gary Gensler for the third time on December 11th.
Damn, the SEC is busier than Santa's elves. BlackRock's third meeting with them yesterday is, in my opinion, the most notable as everyone is waiting to see if they can convince the SEC to allow in-kind contributions in the first round of approvals. https://t.co/r2jqgpg87m
— Eric Balchunas (@EricBalchunas) December 12, 2023
BlackRock and NASDAQ's second meeting with the SEC on November 28th was a continuation of the first meeting with the securities regulator on November 20th, in which the company presented its original in-kind redemption model.
Related: Bitcoin ETFs will drive institutional adoption in 2024 – Mike Novogratz of Galaxy Digital
The SEC has until January 15th to decide on BlackRock's application, with the final deadline set for March 15th.
Meanwhile, ETF analysts expect the SEC to make a decision on several pending spot Bitcoin ETF applicants sometime between January 5th and January 10th.
Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity and Hashdex are among the other financial firms awaiting an SEC decision between these dates.
Magazine: Expect “Records Broken” by Bitcoin ETF: Brett Harrison (ex-FTX US), X Hall of Flame
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