BlackRock has revised its spot Bitcoin exchange-traded fund (ETF) application, introducing an in-kind redemption "prepay" model to make it more accessible to Wall Street banks. The new model allows authorized participants, including major banks like JPMorgan and Goldman Sachs, to create new shares in the fund using cash instead of crypto. BlackRock presented the model in a meeting with the United States Securities Exchange Commission (SEC) on Nov. 28, emphasizing its superior resistance to market manipulation. If approved, this model could enable regulated banks with large balance sheets to participate in Bitcoin ETFs.

BlackRock has revised its spot Bitcoin exchange-traded fund (ETF) application, introducing an in-kind redemption "prepay" model to make it more accessible to Wall Street banks. The new model allows authorized participants, including major banks like JPMorgan and Goldman Sachs, to create new shares in the fund using cash instead of crypto. BlackRock presented the model in a meeting with the United States Securities Exchange Commission (SEC) on Nov. 28, emphasizing its superior resistance to market manipulation. If approved, this model could enable regulated banks with large balance sheets to participate in Bitcoin ETFs.

Key Points:

  • Revised Bitcoin ETF Application: BlackRock has revised its spot Bitcoin ETF application to introduce an in-kind redemption "prepay" model, making it easier for Wall Street banks to participate.

  • Authorized Participants (APs): The new model allows major banks, such as JPMorgan and Goldman Sachs, to act as authorized participants, creating new shares in the fund using cash rather than crypto.

  • Circumventing Restrictions: This model enables regulated banks to circumvent restrictions that prevent them from holding Bitcoin or crypto directly on their balance sheets.

  • Risk Shift: The revised structure shifts risk away from authorized participants and places it more in the hands of market makers, according to BlackRock.

  • Resistance to Market Manipulation: BlackRock claims that the new model offers superior resistance to market manipulation, addressing a key concern that the SEC has used to reject previous spot Bitcoin ETF applications.

  • Investor Protections: The revised ETF structure is designed to strengthen investor protections, lower transaction costs, and increase simplicity and harmonization across the wider Bitcoin ETF ecosystem.

  • SEC Meetings: BlackRock has met with the SEC three times, with the most recent meeting on Dec. 11. The SEC must make a decision on BlackRock's application by Jan. 15, with the final deadline set for March 15.

  • SEC Decision Timeline: ETF analysts predict that the SEC will issue a decision on several pending spot Bitcoin ETF applicants between Jan. 5 and 10. Other financial firms awaiting a decision during this period include Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, and Hashdex.

BlackRock's revised Bitcoin ETF application introduces an in-kind redemption model, aiming to attract Wall Street banks as authorized participants, enabling them to create new shares using cash. The model addresses concerns related to market manipulation, strengthens investor protections, and seeks to enhance simplicity and harmonization across the Bitcoin ETF ecosystem. The SEC must make a decision on BlackRock's application by Jan. 15, with a final deadline set for March 15.


(BRAYDEN LINDREA, COINTELEGRAPH, 2023)