In a significant development for institutional investors in the cryptocurrency space, Nasdaq has filed a proposed rule change that would allow for in-kind creation and redemption of shares for the BlackRock iShares Bitcoin Trust (IBIT). This news comes from a filing made on Friday to the U.S. Securities and Exchange Commission (SEC).
The proposed process is designed specifically for large institutional investors, known as authorized participants (APs), enabling them to directly transact in Bitcoin (BTC) when buying and redeeming shares of the fund. This method is viewed as a more efficient alternative to the cash-based approach previously employed, allowing APs to closely monitor and swiftly respond to the demand for the ETF without the need for cash transactions. It should be noted that retail investors will not have the ability to participate in this process.
When the SEC initially approved spot Bitcoin ETFs, including IBIT, in January, the regulatory agency allowed them to launch with cash redemption as opposed to direct Bitcoin transactions. This approach has faced criticism, particularly regarding its efficiency and the willingness of brokers to engage with actual Bitcoin.
Bloomberg Intelligence ETF analyst James Seyffart commented on the situation, suggesting that the approval for in-kind creations should have emerged earlier. He pointed out via his platform on X that the reluctance of individuals such as SEC Chair Gary Gensler and Commissioner Hester Peirce to allow such a mechanism was driven by various concerns, primarily about the involvement of brokers with actual Bitcoin.
As it stands, BlackRock’s IBIT is the largest spot Bitcoin ETF currently available, having attracted nearly $40 billion in inflows within its first year of operation, marking it as the most successful ETF debut ever recorded.
