Nasdaq’s Proposed Change to Bitcoin ETF

Nasdaq, representing BlackRock, seeks to modify the asset management firm’s spot Bitcoin ETF to permit in-kind redemptions instead of cash.

On Friday, Nasdaq filed an amended rule under Form 19b-4, proposing to allow in-kind transfers for the iShares Bitcoin Trust.

>The exchange intends to revise its prior representations regarding the Trust’s creation and redemption procedures to facilitate in-kind transfers of the Trust’s bitcoin.

This change provides an alternative to the existing cash creation and redemption method.

Previously, before the SEC approved spot Bitcoin ETFs over a year ago, firms were determining operational details for the redemption process. The SEC preferred a cash model requiring BlackRock to fetch bitcoin from storage, sell it immediately, and refund cash to investors.

However, the revamped process will not allow individual investors to conduct in-kind redemptions; only authorized participants may do so, noted James Seyffart, an ETF analyst at Bloomberg Intelligence.

>“This will likely enhance the efficiency of ETF trading,” Seyffart explained. “In my view, these ETFs should have been permitted this from the start, but prior SEC commissioners were against it.”