BlackRock Revises Bitcoin ETF Model To Appease SEC Concerns

cryptonews.com:

BlackRock executives held another meeting with the Securities and Exchange Commission (SEC) on Tuesday to discuss the firm’s application to launch a Bitcoin (BTC) spot ETF in the United States.

Based on publicly released notes from the meeting, the asset manager has modified its ETF blueprint to strike a compromise with the SEC between both groups’ ideal vision for a Bitcoin redemption model.

“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,” wrote BlackRock in its presentation.

As proposed last week, BlackRock’s “in-kind” redemption model was a six-step process for two separate market maker entities to adjust the supply of ETF shares on the market and redeem them directly for BTC. The process is meant to keep the share price joined at the hip with the value of the fund’s underlying BTC at all times.

The SEC has shown disagreement with BlackRock and other applicants – including Grayscale and ARK – over this model, due to the requirement for the U.S. registered broker dealer to interact with bitcoin directly, creating balance sheet risks.

The agency proposed an “In Cash” model in response which, while easier on broker dealers, would the fund’s efficiency and create significantly more steps for BlackRock.

The company’s new model, however, keeps redemptions in-kind while adding just one more intermediary step: the market maker’s offshore entity prepays its U.S. based broker dealer entity with cash before ETF shares are redeemed for bitcoin.

“In so doing, it preserves the many significant benefits to investors of the In-kind model over certain Cash models in the context of bitcoin,” BlackRock argued. Some