BlackRock submits Bitcoin ETF amendment proposal, narrows down issuance and redemption methods, “market feels positive”

Proposed amendments to Bitcoin ETF application

On the 18th, BlackRock, a major US asset management company, resubmitted an amended proposal for a Bitcoin ETF application. According to updated documents, the ticker of the physical ETF for the crypto asset (virtual currency) Bitcoin (BTC) is “IBIT.”

Additionally, the stock issuance and redemption mechanism adopted by the fund, discussed with the SEC (U.S. Securities and Exchange Commission), has been narrowed down to the so-called “in-cash” model.

According to Vance Harwood, president of Six Figure Investing, “Cash only” means that financial institutions (APs) that deal directly with the ETF issuer only need cash to acquire and sell shares in the ETF. will be used.

When purchasing 1 ETF, cash equivalent to the net asset value per share is required. Behind the scenes, the issuer will use that cash to purchase the underlying asset (Bitcoin) on its own to back up the value of the assets the ETF tracks. In other words, when APs directly purchase ETF shares, they do not bring in the ETF’s underlying assets.

BlackRock, Fidelity and others have been in discussions with regulators over the past few weeks regarding the issuance and redemption process for physical Bitcoin ETFs, according to a memo seen by crypto media outlet The Block.

Both companies wanted to adopt an “in-kind” model, where asset managers manage portfolios flexibly. Under this model, APs bring in assets tracked by ETFs and exchange them for shares in the ETF, which is said to be particularly efficient in arbitrage and hedging transactions. However, the SEC is reluctant to adopt “in-kind” in Bitcoin spot ETFs.

However, the proposed amendments leave open the possibility of an “in-kind” process, subject to “regulatory approval.” In this case, providing 1 BTC worth of cash will result in 1 ETF, and the ETF issuer will procure physical Bitcoin behind the scenes, which will be redeemed for cash at redemption.

connection:Fidelity also holds technical meeting with SEC over Bitcoin ETF listing application Bitcoin price rises

ETF issuance/redemption process

Furthermore, when APs redeem ETF shares, cash transactions are also common.

According to Harwood, the SEC’s position can be understood as an effort to clarify where ETFs obtain their underlying Bitcoin from. The ETF buys Bitcoin, presumably from a reputable exchange. On the other hand, if the “in-kind” method is allowed, there is a risk that the origin of the bitcoins provided by AP when issuing ETFs will become unclear.

“It’s important to have everything ready before the holidays for the launch of a Bitcoin ETF,” said Eric Balchunas, senior ETF analyst at Bloomberg. He explained that BlackRock has shown a strong desire to quickly push forward with the launch of ETFs. This development is seen as a “good sign” that Bitcoin ETFs are taking an important step towards becoming a reality.

Ark21Shares and WisdomTree also filed an amendment proposal (S-1) for a Bitcoin spot ETF with the SEC on the 18th. The SEC has yet to approve the ETF, but the market soars on optimism that a decision is soon. At the time of writing, the price of Bitcoin is up 5.8% from the previous day and is trading at 6.18 million yen on bitFlyer.

connection:BlackRock and others submit revised version of Bitcoin ETF application, expectations rise for simultaneous SEC approval

The deadline for reviewing multiple applications is near the final deadline for ARK (1/10). Source: Bloomberg

connection:Learn about Bitcoin ETFs from the beginning: Explaining the advantages and disadvantages of investing and how to buy US stocks

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