BlackRock, a prominent investment firm, has officially been assigned the ticker symbol IBIT for its proposed spot Bitcoin exchange-traded fund (ETF), as stated in an S-1 filing amendment submitted to the Securities and Exchange Commission (SEC).
The filing also revealed that BlackRock intends to implement a cash redemption model for its Bitcoin ETF. Originally considering the possibility of an “in-kind” redemption, the recent document indicates the SEC’s preference for cash transactions, following discussions between BlackRock and the Commission.
“The Trust issues and redeems Baskets on a continuous basis. These transactions will take place in exchange for cash… Baskets are only issued or redeemed in exchange for an amount of cash determined by the Trustee on each day that NASDAQ is open for regular trading,”
Transition to Cash Redemption Model
Under the new cash creation and redemption model, investors will be required to use cash for transactions in exchange for Bitcoin holdings. This approach differs from most ETFs, where investors can exchange Bitcoin for ETF shares.
“BlackRock has gone cash only. That’s basically a wrap. Debate over. In-kind will have to wait. It’s all about getting ducks in a row before the holidays. Good sign,”
– Eric Balchunas, Bloomberg Intelligence ETF analyst
Eric Balchunas, an ETF analyst at Bloomberg Intelligence, highlighted this shift and its significance. BlackRock’s previous proposal suggested an in-kind model, where investors would receive the underlying assets, such as Bitcoin, upon redemption. Alternatively, the cash redemption model requires investors to purchase Bitcoin ETFs with cash and then sell them for actual Bitcoins when exiting.
Adoption of Cash Creation and Redemption Model
In response to BlackRock’s decision, other firms have also amended their spot Bitcoin filing to conform to the SEC’s preference for the cash creation and redemption model. ARK Invest and 21Shares, for example, have chosen to adopt this approach in the initial stages of their Bitcoin ETFs.
Regarding Ethereum ETFs, ARK Invest and 21Shares are awaiting the SEC’s decision, which was originally due by December 26th. However, the SEC has extended the deadline to May 2024.
