SEC pressured BlackRock into changing its Bitcoin ETF cash generating mechanism


Other Bitcoin ETF issuers have also revised their filings to allow for cash redemptions of their proposed funds, including Valkyrie, Invesco, and Galaxy Digital.

After receiving criticism from authorities over the way the fund would be established and redeemed, investment giant BlackRock today submitted an updated S-1 to the SEC for its planned spot Bitcoin ETF.

To maintain a share price that tracks the underlying asset (BTC), exchange-traded funds (ETFs) may issue or redeem shares in kind, trade Bitcoin for ETF shares, or purchase or sell Bitcoin on the open market using cash.

In response to the SEC’s requests, BlackRock has amended its Bitcoin ETF application to initially exclude in-kind creations and redemptions.

“Cash will be exchanged in these transactions. Similar transactions may also happen in return for bitcoin, but only after the in-kind regulatory approval,” according to BlackRock.

Nonetheless, subject to regulatory clearance, BlackRock intends to permit in-kind creations in the future, according to the updated filing.

The SEC allegedly advised companies looking to issue Bitcoin ETFs last month to switch to cash creations rather than allowing in-kind creations.

In a meeting with SEC personnel recently, BlackRock demonstrated how both techniques might work, although they had previously favored adopting an in-kind basis. The asset manager recognizes that in-kind redemptions provide advantages, such as reduced tax liability.

Last week, other companies, including Valkyrie, Invesco, and Galaxy Digital—all of which have Bitcoin ETF applications pending—changed their focus to describing cash creations in their modified SEC filings.

According to CoinGecko, Bitcoin’s price has climbed 3.3% in the last 24 hours, and it is now trading at $42,700.

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