BlackRock has revised its Bitcoin (BTC) exchange-traded fund (ETF) application to make it easier for Wall Street banks to participate by creating new shares in the fund in cash, rather than crypto.
The new in-kind redemption “prepayment” model will allow banking giants such as JPMorgan or Goldman Sachs to act as authorized participants in the fund, allowing them to bypass restrictions that prevent them from holding Bitcoin or crypto directly into their balance sheets.
The new model was presented by six members of BlackRock and three of NASDAQ at a press conference on November 28. meeting with the United States Securities Exchange Commission.
If approved, the move could be a game-changer for Wall Street banks with trillion-dollar balance sheets looking to get involved, as many highly regulated banks are unable to hold Bitcoin themselves.
Under the revised model, APs would transfer the cash to a broker, who would then convert the cash into Bitcoin before it is stored by the ETF’s custody provider, which is Coinbase Custody in the case of BlackRock.
The new structure also works by shifting risk away from APs and placing it more in the hands of market makers.
BlackRock said the new model also provides “superior resistance to market manipulation” – which has been a key reason why the SEC has repeatedly denied all previous applications for spot Bitcoin ETFs.
Additionally, BlackRock claimed that the new ETF structure would strengthen investor protections, reduce transaction costs and increase “simplicity and harmonization” in the broader Bitcoin ETF ecosystem.
BlackRock meets with the SEC for the third time
Most recently, BlackRock met with the Gary Gensler-led SEC for the third time on December 11. according to to a recent filing with the SEC.
Damn, the SEC is busier than Santa’s elves. BlackRock’s third meeting with them yesterday is the most notable IMO, as everyone is waiting to see if they can convince the SEC to allow in-kind creations in the first round of approvals. https://t.co/r2jqgpg87m
– Eric Balchunas (@EricBalchunas) December 12, 2023
BlackRock and NASDAQ’s second meeting with the SEC on November 28 followed their first meeting with the securities regulator on November 20, during which they presented their original in-kind repurchase model.
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The SEC must make a decision on BlackRock’s request by January 15, with the final deadline set for March 15.
Meanwhile, ETF analysts predict that the SEC will issue a decision on several pending Bitcoin spot ETF applicants between January 5 and 10.
Other financial companies awaiting a decision from the SEC between these dates include Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity and Hashdex.
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