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Bloomberg ETF analyst James Seyffart believes that BlackRock recently met with some officials from the United States SEC on its spot Bitcoin ETF application.
SEC Engaging Stakeholders on BTC Spot ETF Push
There has been news about the United States Securities and Exchange Commission having conversations with exchanges over the much-anticipated launch of spot Bitcoin ETF. The focus of the discussions is on the choice of cash model summary or “in-kind” redemption model for the impending ETF offering.
According to popular analyst Eric Balchunas, “Hearing chatter SEC’s Trading & Markets engaged with exchanges this week on spot bitcoin ETF 19b-4s, is advising them they’d like the ETFs to do cash creates (vs in-kind), and has asked them to get in amendments in next couple weeks.”
In a recent tweet, Seyffart highlighted that prominent investment asset management firm BlackRock seems to prefer “in-kind” to “cash create” for its iShares Bitcoin Trust ETF. The analyst is positive that this may be the best option for BlackRock as its probably presents the cleanest structure for the asset manager and its end investors.
He shared an image of a document designed by BlackRock where the firm managed to make a distinction between the two redemption models. In-kind model will require only a 5 step process that starts with a Market Marker (MM) placing the order for redemption through an Authorized Participant (AP).
Next, the ETF issuer approves the order and the Market Maker buys the ETF shares through a Listing Exchange. Notably, the ETF share will be delivered to a Transfer Agent by the market marker. This is after the ETF issuer may have instructed the Bitcoin custodian to release the coin to the Market Maker.
Bitcoin ETF Cash Model Overview
In the case of the cash model, after initiating the redemption, the ETF issuer has to first instruct the BTC custodian to move cash out of cold storage for it to be sold. It is after this that Market Maker can enter a trade with the ETF issuer to buy BTC for USD.
Unlike BlackRock, other applicants prefer the “cash create” option as it would mitigate the restrictions placed on broker-dealers.
Meanwhile, Grayscale has also been in talks with the commission and has revealed the execution of a Transfer Agency and Service Agreement with BNY Mellon for its spot Bitcoin ETF. These meetings with the SEC have expanded the hopes of investors with respect to a potential approval of a spot Bitcoin ETF.
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