Financial giant BlackRock has taken a significant step toward creating its highly anticipated Bitcoin exchange-traded fund (ETF) by revealing its preference for an in-kind creation structure during its recent meeting with the US Securities and Exchange Commission (SEC).
The meeting with the SEC has shed light on BlackRock’s strategy for its proposed Bitcoin ETF, highlighting its tilt toward in-kind creation rather than cash creation.
This preference, revealed through slides presented during the meeting, suggests that BlackRock is seeking a cleaner and more transparent approach for both the company and end investors.
Looks like @BlackRock also met with SEC! There’s a couple slides in relation to in-kind vs cash creation. Based on this it looks like BlackRock prefers in-kind for their #bitcoin ETF (makes sense as its probably cleanest structure for them & end investors)
h/t @btcNLNico https://t.co/AK0XspL4zJ pic.twitter.com/eeuUT9T5mn
— James Seyffart (@JSeyff) November 22, 2023
In-kind creation involves the ability to redeem ETF shares for physical Bitcoin instead of a cash equivalent.
This strategic choice could offer clarity on the fund’s underlying assets, an attractive move for investors seeking direct exposure to the cryptocurrency without having to deal with its custody.
The debate between in-kind and cash creation is fundamental for ETFs, as it defines how assets are managed and how investors can buy or sell their shares in the fund.
An attempt to offer a more efficient and transparent structure
Despite this preference, reports suggest that the SEC could raise concerns about the need to include cash redemption options to avoid the use of unregistered brokers.
This suggests that BlackRock and the SEC could disagree on certain crucial details.
This progress in discussions with the SEC shows that BlackRock is committed to the process of developing a Bitcoin ETF and is willing to work on the details necessary for its eventual launch.
The development of this product is highly anticipated as it is anticipated to attract considerable institutional investment to the cryptocurrency market in the near future.