BlackRock and Nasdaq representatives recently met with the United States Securities and Exchange Commission (SEC) to discuss the possibility of listing a Spot Bitcoin Exchange-Traded Fund (ETF) and its details and mechanics.
BlackRock SEC Meeting
According to a November 20 SEC memo, in the BlackRock SEC meeting potential redemption models including in-kind or in-cash options for the iShares Bitcoin Trust were discussed. However, the SEC’s response to these models is still undisclosed.
BlackRock’s Stand on Redemption Requirements
According to the filing, BlackRock Inc. clarified its stance on redemption requirements for investors looking to exit and redeem their shares. Notably, redemptions currently pose a challenge for approval, with issuers resisting the SEC’s preference for cash redemption.
BlackRock, alongside Ark, advocates for in-kind redemption, a process where market makers receive bitcoin, which is later sold for cash.
This approach, highlighted in BlackRock’s SEC presentation, offers tax efficiency, avoiding the need to sell securities for redemptions that could potentially trigger capital gains taxes. Renowned ETF analyst with Bloomberg, James Seyffart, stated:
“It looks like BlackRock also met with the SEC! It looks like BlackRock prefers in-kind for their bitcoin ETF (which makes sense as its probably cleanest structure for them and end investors).”
It is important to note that BlackRock submitted its initial application for a Spot Bitcoin ETF listing on the Nasdaq stock exchange in June. The asset management company is one of the major firms, including Fidelity, WisdomTree, Invesco, Valkyrie, VanEck, and Bitwise, awaiting SEC approval.
In October, a resurfaced video from 2019 featured SEC Chair Gary Gensler criticizing the commission’s “inconsistent” approach to Spot Bitcoin products. It remains unclear whether Gensler supports efforts for digital asset-linked investment vehicles. Notably, the SEC has previously approved ETFs tied to Bitcoin futures.
Grayscale’s Latest Move
Notably, SEC officials also met with Grayscale representatives on November 20, discussing the company’s pursuit of listing a bitcoin ETF.
Reports suggest the SEC could be nearing a decision on a Spot Bitcoin ETF, indicating potential progress toward mainstream digital asset adoption if approved. Grayscale’s recent filing adds to this momentum.
On November 22, Grayscale submitted an S-3 form, aiming to convert its Grayscale Bitcoin Trust (GBTC) into a Spot Bitcoin ETF.
Seyffart pointed out significant changes in this amendment, including a shortened line related to cash orders and the removal of risk disclosure pages. This move indicates Grayscale’s efforts to streamline the filing process. The analyst stated:
“It looks like they are shortening this particular filing and telling people they can just view the risk factors in the 10-ks, 8-ks, and 10-Q’s they already file/filed. No reason to duplicate the S-3’s, I guess?”
The filing specifies that redemptions of shares pursuant to cash orders will only occur if approved by the sponsor in writing, in its sole discretion.
Conclusion
The recent meetings between the SEC and fund managers, including Grayscale, indicate potential signals of progress toward approving a Spot Bitcoin ETF filing. In late August, Grayscale Investments achieved a significant legal victory in its pursuit to convert the GBTC into an ETF. Judge Neomi Rao ruled that the SEC was incorrect in rejecting Grayscale’s application, citing a lack of safe practices and fraud protection methods.
Related reading:
