Nasdaq’s proposed rule change could revolutionize the cryptocurrency market by allowing in-kind redemption for BlackRock’s Bitcoin ETF, potentially increasing efficiency and reducing costs.
Nasdaq Seeks In-Kind Redemptions for BlackRock Spot Bitcoin ETF
The Securities and Exchange Commission (SEC) had previously approved spot bitcoin exchange-traded funds (ETFs), including the BlackRock iShares Bitcoin Trust (IBIT), with a cash redemption mechanism in January.
Nasdaq Proposes Rule Change
Nasdaq has filed a proposed rule change with the SEC to allow in-kind creation and redemption for the IBIT. This process enables authorized participants (APs) to buy and redeem shares of the fund directly in bitcoin, without involving cash. APs are large institutional investors who closely monitor demand for the ETF and can act quickly by buying or selling shares.
Benefits of In-Kind Redemption
In-kind redemption is considered more efficient than cash redemption because it eliminates the need for brokers to handle actual bitcoin. This process allows APs to buy or sell shares without the involvement of cash, making it a faster and more streamlined process.
Background on IBIT’s Success
The BlackRock iShares Bitcoin Trust (IBIT) is the largest spot BTC ETF on the market, attracting nearly $40 billion in inflows during its first year. It holds the record for the most successful ETF debut ever.
SEC Approval of Spot Bitcoin ETFs
When the SEC approved spot bitcoin ETFs last January, they allowed cash redemption instead of in-kind redemption. However, Bloomberg Intelligence ETF analyst James Seyffart noted that this decision was likely influenced by concerns about brokers handling actual bitcoin.
The proposed rule change by Nasdaq aims to allow in-kind creation and redemption for the IBIT, which could have significant implications for the cryptocurrency market.
