Nasdaq has filed a request with the U.S. Securities and Exchange Commission (SEC) on behalf of BlackRock, aiming to introduce a rule change for the asset manager’s iShares Bitcoin Trust (IBIT). The proposed amendment seeks to allow in-kind creation and redemption of shares, a move expected to enhance the efficiency and transparency of BlackRock’s spot Bitcoin exchange-traded fund (ETF).
What Does This Mean?
If approved, the rule change would allow Authorized Participants—institutions responsible for creating and redeeming ETF shares—to use either cash or Bitcoin for these transactions. This in-kind mechanism eliminates the need for fund managers to sell or purchase Bitcoin in the open market to meet share demands, reducing costs and improving efficiency. Notably, this model offers advantages such as avoiding bid/ask spreads and broker commissions.
However, retail investors will not be directly impacted by this change, as they will still rely on the cash model for their transactions. The proposal primarily benefits institutional participants, ensuring smoother operations and improved liquidity for the ETF.
Industry Reactions
James Seyffart, a Bloomberg ETF analyst, remarked that this change should have been allowed from the start when IBIT and other U.S. spot Bitcoin ETFs launched in January 2024. Crypto analyst MartyParty highlighted the potential for increased transparency, with more on-chain records of Bitcoin flows.
Meanwhile, Chris J. Terry, chief architect at Bitseeker Consulting, clarified misconceptions about the filing. He emphasized that the amendment is targeted at Authorized Participants and will not allow individual investors to deposit or redeem Bitcoin directly. Instead, this move ensures better liquidity management for the ETF and enhances its tax efficiency by minimizing capital gains distributions.
A Growing ETF Landscape
BlackRock’s IBIT has already seen significant success, recording $39.57 billion in inflows since its launch in January 2024. On the same day as Nasdaq’s filing, several other crypto-related ETF applications surfaced. European investment firm CoinShares applied for Litecoin (LTC) and XRP (XRP) ETFs, while Grayscale submitted filings to convert its Solana (SOL) and Litecoin (LTC) trusts into ETFs. Grayscale also proposed new ETFs, including a Bitcoin Adopters ETF and an Ethereum Premium Income ETF.
The Bigger Picture
The proposed in-kind redemption model not only underscores the growing institutional interest in cryptocurrency ETFs but also represents a step toward streamlining ETF operations. If approved, it could set a new standard for crypto ETFs, potentially encouraging broader adoption and greater investor confidence in these financial products.
The move highlights the continued evolution of the cryptocurrency landscape, with major players like BlackRock and Nasdaq driving innovation while pushing for regulatory clarity.
