BlackRock recently met with the US Securities and Exchange Commission (SEC) and amended its S-1 filing for its spot Bitcoin (BTC) exchange traded funds (ETF). The revised document reveals the IBIT ticker for the financial instrument.
Most importantly, the updated application contained a new provision for the creation and redemption model of the iShares Bitcoin Trust. The amendment follows the SEC’s recommendation to include cash redemptions. However, the asset manager firm still pushes for its original in-kind system in addition to the regulator’s preference.
There are also reports that both BlackRock and Nasdaq had a meeting with the SEC’s Division of Trading and Markets.
“The discussion concerned The NASDAQ Stock Market LLC’s proposed rule change to list and trade shares of the iShares Bitcoin Trust under NASDAQ Rule 5711(d),” said SEC’s memo. “Blackrock also provided the attached presentation.”
The flowcharts shown below provide a comparison between the in-cash redemption model favored by SEC and the original in-kind redemption model submitted by BlackRock:
As shown in the proposed mechanisms, the in-kind version is more simplified and it allows greater flexibility for the issuer. It is basically similar to the stock-based ETF wherein the retail investors could redeem their shares via Bitcoin from BlackRock, which could then be converted into cash through a broker-dealer.
On the other hand, the in-cash variant adds more safeguards to consumers to quell the concerns of the regulatory body of possible avenues for market manipulation. The chart above details a process where BlackRock takes the Bitcoin out of its wallet to be able to sell it on the market and the cash is handed to the investor.
The difference of the schemes all boils down to who will take the conversion risk between the ETF issuer and the retail investor.
How is This a Great News?
This is seen as a positive development and a win-win situation for BlackRock and SEC. With Blackrock adjusting to accommodate the SEC’s wishes, the regulator will no longer have a reason to deny the application because the company simply followed what it dictated.
The news further fuels speculations that the SEC may be looking to finalize its decisions regarding all pending spot Bitcoin ETF filings come January 5, 2024. According to industry watchers and analysts, this will eventually lead to major announcements by January 10, which could finally pump Bitcoin into new highs.
How is Bitcoin Holding Up?
BTC hadn’t moved much as of this writing at 11:30 AM UTC. The most dominant cryptocurrency by market cap is still trading at 42,800, dipping only by 0.55% on the 24-hour chart.
Trading volume also fell by 13.36% as only $20.734 billion worth of Bitcoin moved in the market during the timeframe. Could this be a sign that most Bitcoiners are on a HODL right now?
In the same bracket, prices of the digital asset moved between $41,800 and $43,000.