BlackRock Adjusts Bitcoin ETF Application For Wall Street Banks, Modifies Redemption Model

BlackRock, the New York-based investment giant managing around $9.42 trillion in assets as of June 30, 2023, has made changes to its spot Bitcoin exchange-traded fund (ETF) application. These amendments facilitate Wall Street banks' participation in the pending crypto investment vehicle while shifting risk to crypto market makers.

The company presented these adjustments to the U.S. Securities and Exchange Commission (SEC) in late October through its proposed "In-kind Redemption Prepay."

The proposal outlines a method to create new fund shares using cash, enabling banks to bypass current restrictions that prevent them from directly holding cryptocurrencies on their balance sheets.

BlackRock's solution revises the existing in-kind redemption model, requiring an offshore market maker entity to prepay cash to the registered broker-dealer entity before delivering ETF shares during the redemption process.

Under the proposed settlement flow, crypto market makers initiate redemption orders by sending cash to the broker-dealer, kickstarting the settlement before authorized participants, i.e., Wall Street banks, become involved.

This prepaid model aims to limit the broker-dealer's balance sheet risks associated with transferring Bitcoin to the market maker. Additionally, it addresses regulatory concerns about market manipulation and broker-dealer registrations.

BlackRock also stated that the proposed structure would enhance investor protection, reduce transaction costs, and foster consistency within the Bitcoin ETF ecosystem.

BlackRock presented a revised in-kind model to the Trading and Markets Division of the SEC in late November, following feedback from officials during their previous meeting on Nov. 20.

Approval of this proposal by the SEC could significantly impact Wall Street institutions, opening the door for their entry into the cryptocurrency industry.

The SEC has until Jan. 15, 2024, to decide on BlackRock's spot Bitcoin ETF application. ETF analysts anticipate a decision for the initial group of applicants between Jan. 8 and Jan. 10.

As of 2:16 p.m. ET on Thursday, Bitcoin, the world's largest crypto asset by market capitalization, traded at $43,149.33, registering a 2.65% surge in the last 24 hours. Its 24-hour trading volume rose by 32.81% to $29.95 billion.

In the past seven days, Bitcoin experienced a 0.4% decrease despite the recent 2.65% price spike.

Bitcoin's latest price action represents a 2.65% spike in its value in the last 24 hours and a 0.4% loss over the past seven days.

Data from CoinmarketCap showed that Bitcoin's current circulating supply stands at 19.57 million BTC with its value continuously spiking by 2.6% at a $844.37 billion market cap.