SEC Considers Proposal for BlackRock’s Bitcoin ETF

The U.S. Securities and Exchange Commission (SEC) is evaluating a proposal to modify BlackRock’s spot Bitcoin exchange-traded fund (ETF) to enable in-kind redemptions.

In a filing made public on Thursday, the SEC encouraged feedback on the proposal, which must be submitted within 21 days of its publication in the Federal Register. Following this period, the SEC may choose to approve, disapprove, or instigate proceedings regarding the proposal.

Last month, Nasdaq, on behalf of BlackRock, submitted an amended rule filing that would permit in-kind redemptions and creations for the iShares Bitcoin Trust, detailed in the Form 19b-4 filing.

Over a year ago, as the SEC deliberated on the approval of spot Bitcoin ETFs, firms were negotiating the technical aspects of the redemption process for such products. At that time, the SEC preferred a cash redemption model, stipulating that BlackRock should retrieve bitcoin from storage, immediately sell it, and return the cash to the investor.

In January 2024, the SEC approved BlackRock’s proposal for a spot ETF, along with others.

It’s important to note that modifying the redemption and creation processes will not allow individual investors to make in-kind transactions; this capability will only be available to authorized participants, as explained by James Seyffart, an ETF analyst at Bloomberg Intelligence, in a post on X.