BlackRock, a global leader in investment management, has revised its proposed spot Bitcoin exchange-traded fund (ETF) to allow cash redemptions. This update could be a strategic move in gaining approval from the US Securities and Exchange Commission (SEC).

The updated filing for the iShares Bitcoin Trust ETF indicates that the Trust will issue and “redeem baskets” in exchange for cash. This flexibility, subject to regulatory approval, could also extend to Bitcoin exchanges in the future.

Cash Redemptions To Set New Course For Spot Bitcoin ETF

Eric Balchunas, a respected Bloomberg analyst, highlighted the importance of this update on the X platform, terming it a “wrap.” This move signifies BlackRock’s commitment to aligning its offering with regulatory expectations, potentially paving the way for the long-awaited green light from the US SEC.

According to Balchunas, the shift to cash redemptions means BlackRock would accept cash to create new shares and vice versa, diverging from the typical ETF model where assets like Bitcoin could be directly exchanged for ETF shares.

BlackRock has gone cash only. That’s basically a wrap. Debate over. In-kind will have to wait. It’s all about getting ducks in row bf holidays. Good sign. https://t.co/vgocs1aIwS

— Eric Balchunas (@EricBalchunas) December 19, 2023

Vance Herwood, an investor and consultant specializing in volatility as an asset class, also offered insights on BlackRock’s update. Herwood explained that the “cash only” approach for authorized participants (APs) means that ETF shares will be exchanged solely for cash rather than in-kind asset transfers like Bitcoin.

This approach, while adding a layer of transactional steps, is seen as a minor impact on the scale of these funds. The SEC’s apprehension towards in-kind transfers for spot Bitcoin ETFs is “understandable,” according to Herwood, considering the transparency and origin of the underlying Bitcoin.

Herwood’s analysis further suggests that this cash-only method could streamline the process, ensuring that the ETF acquires its Bitcoin from “reputable” sources, thereby aligning with regulatory standards. This method could also simplify the redemption process, where APs return ETF shares to the issuer in exchange for cash, maintaining a clear and transparent transactional flow.

BlackRock And Others Step Up Engagement With SEC for BTC Spot ETF Green Light

Meanwhile, aside from the cash redemption amendment, recent interactions between BlackRock and the US SEC suggest an intensified effort to navigate the regulatory landscape to approve spot Bitcoin ETFs.

According to James Seyffart, Bloomberg’s ETF analyst, BlackRock recently had its third meeting with the SEC in several weeks, a signal of severe and ongoing discussions. Seyffart’s X post also revealed similar engagements by other key players in the industry, including Fidelity, Grayscale, and Franklin.

These meetings, attended by the Division of Trading & Markets and the Division of Corporate Finance, are critical as these are the SEC divisions that will ultimately decide the fate of spot Bitcoin ETFs.

The involvement of these divisions underscores the comprehensive review process undertaken by the US SEC and highlights the collaborative efforts by issuers like BlackRock to address regulatory concerns. The presence of these key SEC divisions in the meetings indicates a constructive dialogue and potential progress toward approving these spot ETF products.

Featured image from Unsplash, Chart from TradingView