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Dec 20, 2023

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Regulation

by Kevin Helms

Dec 01, 2023



BLACKROCK PROPOSES 'REVISED IN-KIND MODEL' FOR SPOT BITCOIN ETF TO RESOLVE SEC'S
CONCERNS




Blackrock, the world’s largest asset manager, has held another meeting with the
U.S. Securities and Exchange Commission (SEC) to discuss its spot bitcoin
exchange-traded fund (ETF) application. The firm has proposed a “revised
in-kind” model for its spot bitcoin ETF that it believes will “resolve” the
SEC’s concerns. The regulator has reportedly indicated that it prefers spot
bitcoin ETFs to use the cash creation method.


REVISED IN-KIND MODEL FOR SPOT BITCOIN ETF

Blackrock, the world’s largest asset manager, held another meeting with the U.S.
Securities and Exchange Commission (SEC)’s Division of Trading and Markets this
week regarding its spot bitcoin exchange-traded fund (ETF) application.
According to a memorandum dated Nov. 28 posted on the SEC’s website, the two
parties discussed “Nasdaq Stock Market LLC’s proposed rule change to list and
trade shares of the iShares Bitcoin Trust.”

The asset management firm explained: “During our 11/20 meeting with Trading &
Markets staff, we understood the SEC has certain unresolved questions around the
in-kind model relating to balance sheet impacts and risks to the market maker’s
U.S. registered broker/dealer entity … during the redemption flow.”

Blackrock proceeded to explain its proposal of a “revised in-kind model,” also
called a “prepay model,” which it believes would resolve the SEC’s concerns. “We
would like to propose the following approach, that we believe would resolve
these concerns,” the world’s largest asset manager wrote. “This model appears to
address the staff’s concern with in-kind, addressing the critical dimension on
which the in-kind model would otherwise be not preferred to the cash model.” The
firm elaborated:

> It preserves the many significant benefits to investors of the in-kind model
> over certain cash models in the context of bitcoin.

Revised in-kind model for spot bitcoin ETF. Source: Blackrock


Blackrock detailed that the benefits offered by the revised in-kind approach
include lower transaction costs, execution risks borne by crypto market makers
instead of investors, heightened resistance to market manipulation, elimination
of the necessity for issuers to fund or pre-fund sell trades, diminished
operational event risks, “and simplicity and harmonization across the ecosystem
given significantly lower variance on how in-kind models can be executed vs.
cash models.”

Nonetheless, the SEC is said to favor the cash model. Recently, Bloomberg ETF
analyst Eric Balchunas shared on X that the SEC’s Division of Trading and
Markets has purportedly communicated with exchanges, advising them to opt for
the cash-create approach for spot bitcoin ETFs rather than the in-kind method.
Following this report, Blackrock held discussions with the SEC to address the
matter, maintaining its stance on using the in-kind creation model.

SEC Chair Gary Gensler recently revealed that the regulator is considering
between eight and 10 spot bitcoin ETF applications. A number of people have
predicted that the securities regulator will approve multiple spot bitcoin ETFs
at once early next year.

Do you think the SEC will approve Blackrock’s spot bitcoin ETF application if
the asset manager insists on using the in-kind model? Let us know in the
comments section below.

TAGS IN THIS STORY

Blackrock, Crypto, crypto etfs, crypto laws, Cryptocurrency, SEC, SEC bitcoin
ETFs, spot bitcoin ETFs


KEVIN HELMS

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an
evangelist ever since. His interests lie in Bitcoin security, open-source
systems, network effects and the intersection between economics and
cryptography.



SEC'S PREFERENCE PREVAILS: BLACKROCK ADOPTS CASH MODEL FOR SPOT BITCOIN ETF

Regulation | 12 hours ago

SEC EXPECTED TO APPROVE MULTIPLE SPOT BITCOIN ETFS IN ONE DAY, SAYS VANECK CEO

Regulation | 1 day ago

Image Credits: Shutterstock, Pixabay, Wiki Commons





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IN CASE YOU MISSED IT

SEC Chair Gensler: We Do Things According to Our Authorities and How Courts
Interpret Them

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has affirmed
that the securities regulator acts according to its authorities and how the
courts interpret them. This includes how the agency plans to deal with spot
bitcoin exchange-traded fund (ETF)… read more.


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BITCOIN ETFS COULD CAPTURE $72 BILLION




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