BlackRock bows to SEC pressure on Bitcoin ETF cash creations model

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Investment management giant BlackRock filed an amended S-1 with the Securities and Exchange Commission (SEC) today for its proposed spot Bitcoin exchange-traded fund (ETF), bowing to pressure from regulators regarding the fund’s creation and redemption model.

ETFs can keep their share prices aligned with the underlying asset (BTC) by creating or redeeming shares in-kind, exchanging Bitcoin for ETF shares, or with cash by buying or selling Bitcoin on the open market.

The updated filing shows BlackRock giving in to the SEC’s demands to exclude in-kind creations and redemptions for its Bitcoin ETF, at least initially.

“These transactions will take place in exchange for cash. Subject to the In-Kind Regulatory Approval, these transactions may also take place in exchange for bitcoin,” said BlackRock in the filing.

However, the amended filing indicates BlackRock hopes to eventually facilitate in-kind creations pending regulatory approval.

The SEC last month reportedly advised companies seeking to launch Bitcoin ETFs to switch to cash creations rather than allowing in-kind creations.

BlackRock had originally preferred using an in-kind model, meeting with SEC staff recently to demonstrate how both methodologies could work. The asset manager sees benefits to in-kind redemptions such as tax efficiency.

Other firms with pending Bitcoin ETF applications also switched to detailing cash creations in updated SEC filings last week, including Valkyrie, Invesco, and Galaxy Digital.

Bitcoin is trading at the $42,700 level, up 3.3% over the last 24 hours, according to CoinGecko.

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