BlackRock’s Bitcoin ETF Filing Shifts to Cash Creation: Is SEC Approval Now Inevitable?

Exciting news for crypto enthusiasts! It appears we’re inching closer to a Bitcoin Spot ETF approval, and a significant development just unfolded. BlackRock, a financial giant, has amended its Bitcoin Spot ETF filing, and the change is telling. What’s the buzz? They’ve opted for cash creation and redemption for now, with the possibility of in-kind transactions later, pending regulatory green light. Let’s break down what this means and why it’s a potential game-changer.

What Exactly Did BlackRock Change in Their Bitcoin ETF Filing?

In a nutshell, BlackRock’s latest amendment specifies that initially, the creation and redemption of shares for their Bitcoin Spot ETF will be exclusively in cash. Here’s the key excerpt from their filing:

“The Trust issues and redeems Shares only in blocks of 40,000. These transactions will take place in exchange for cash. Subject to The Nasdaq Stock Market LLC (“NASDAQ”) receiving the necessary regulatory approval to permit the Trust to create and redeem Shares in-kind for bitcoin (the ‘In-Kind Regulatory Approval’), these transactions may also take place in exchange for bitcoin.”

Essentially, to start, authorized participants will buy and sell ETF shares using cash. The option for “in-kind” transactions, where Bitcoin itself could be directly exchanged for ETF shares, isn’t off the table, but it’s subject to future SEC approval via NASDAQ.

This amendment aligns BlackRock with what seems to be the SEC’s current preference. Interestingly, Ark Invest made a similar amendment earlier the same day. However, it’s not a uniform approach across all applicants. WisdomTree’s recent amendment, for example, still mentions in-kind redemption as an option:

“For a redemption of Shares, the Sponsor shall arrange for the bitcoin represented by the Basket to be distributed in-kind or sold and the cash proceeds distributed.”

It’s highly likely that WisdomTree, and possibly others like Fidelity who haven’t yet amended, will need to follow suit and revise their filings to prioritize cash creation and redemption at launch. Why this sudden shift, and what does it signal?

Why Cash Creation and Redemption? What Does the SEC Want?

The apparent push for cash creation and redemption from the SEC likely stems from regulatory considerations and investor protection. Here’s a breakdown of potential reasons:

• Simplicity and Regulatory Clarity: Cash transactions are arguably simpler to regulate and monitor compared to in-kind transactions involving direct Bitcoin exchange. This could ease the SEC’s concerns around market manipulation and custody complexities.
• Investor Protection: Cash-based systems might be perceived as offering a more straightforward and potentially safer route for retail investors entering the Bitcoin ETF market.
• Initial Launch Focus: Starting with cash creation and redemption could be a phased approach. The SEC might be willing to approve ETFs with this structure initially, with the potential to consider in-kind options later as the market matures and regulatory frameworks evolve.

Is Bitcoin ETF Approval Finally Around the Corner?

This wave of amendments focusing on cash creation is widely interpreted as a positive sign. It suggests that the SEC and ETF applicants are actively working to address the final points of contention. The article you provided astutely points out:

“That means the last matter that was to be addressed has come to a conclusion. All that’s left now is for the non amended filings to be amended, like Fidelity, and then approval.”

If the remaining applicants swiftly amend their filings to align with the cash creation model, we could be looking at a potential approval timeline within weeks, possibly even next week! However, the SEC might also choose to utilize the full timeframe available, with a potential decision by January 10th and trading commencing in early 2024.

See Also: ARK Invest Has Amended Its Bitcoin Spot ETF

What’s Next? Key Takeaways for Bitcoin and Crypto Investors

Here’s what you should be watching for and what this could mean:

• Monitor Remaining Filings: Keep an eye on filings from other major applicants like Fidelity. Amendments towards cash creation will reinforce the positive trajectory.
• Potential Approval Window: The next few weeks are critical. Approval could come sooner than many expect if amendments are completed swiftly. January remains the latest anticipated timeframe.
• Market Impact: Bitcoin ETF approval is widely anticipated to be a significant catalyst for Bitcoin and the broader crypto market, potentially unlocking substantial institutional investment.
• Cash vs. In-Kind – For Now: Understand that initially, these ETFs are likely to operate with cash creation and redemption. In-kind options might be considered down the line.

Conclusion: A Step Closer to Mainstream Bitcoin Investment?

BlackRock’s amendment, alongside similar moves from other applicants, signals a crucial step forward in the journey towards a Bitcoin Spot ETF approval in the US. While the SEC’s final decision remains pending, the shift to cash creation and redemption appears to address key regulatory hurdles. For Bitcoin and the crypto industry, this development brings us closer to mainstream adoption and broader investor access. The coming weeks promise to be pivotal – stay tuned!