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BlackRock clears latest SEC hurdle for Bitcoin ETF: ‘Debate over’

BlackRock clears latest SEC hurdle for Bitcoin ETF: ‘Debate over’
After holding out against the SEC, BlackRock has agreed to offer cash redemptions on its potential Bitcoin ETF. Credit: LUDOVIC MARIN/POOL/EPA-EFE/Shutterstock
  • BlackRock has agreed to cash redemptions for its potential spot Bitcoin ETF, after pushing for an in-kind model.
  • The end of the debate over redemptions is a good sign, according to Eric Balchunas.

The world’s largest asset manager has ceded ground in its quest for a spot Bitcoin exchange-traded fund. BlackRock has, for now, agreed to offer cash redemptions on its potential Bitcoin ETF after initially pushing back against the US Securities and Exchange Commission.

Cash create or you’ll wait

The debate over how spot Bitcoin ETFs will handle creations and redemptions of new shares is over — for now.

BlackRock has agreed to the SEC’s preferred method of redemptions after weeks of deliberations. The move is “all about getting ducks in row” before the holidays, said Bloomberg Intelligence ETF analyst Eric Balchunas.

It’s a good sign, he added.

“That’s basically a wrap,” he wrote. “Debate over. In-kind will have to wait.”

What does this mean?

New shares in the potential ETF will only be created using cash, as opposed to exchanging the underlying asset — Bitcoin, in this case — for its equivalent amount of shares.

Regardless of the redemption mechanism, new shares in the ETF will lead to Bitcoin purchases.

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The SEC prefers cash creations as it means only the issuers, in this case BlackRock will handle Bitcoin. This avoids unregistered broker dealer subsidiaries handling Bitcoin, Balchunas has said.

“Cash creates are worse for taxes because cash changes hands,” Balchunas said last week. In-kind simply involves a trade and no cash exchanges. By only allowing cash creates, the SEC removes one major advantage of ETFs — tax efficiency.

However, after 10 years of applications, it’s still better than nothing.

BlackRock was the final holdout, coming shortly after Cathie Wood’s ARK Invest amended its filing.

Valkyrie agreed to cash-only last week, which was evidence that the SEC was saying, “cash create or you will wait,” according to Balchunas.

Crypto market movers

  • Bitcoin rose 5% over the past day to trade just below $43,000.
  • Ethereum gained 4.7% to over $2,200.
  • Injective is up 22%.

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