BlackRock has made a significant alteration to its Bitcoin exchange-traded fund (ETF) application, aiming to facilitate participation by major Wall Street banks.
This change involves the creation of new fund shares using cash, rather than relying solely on cryptocurrency assets.
The innovative “in-kind redemption prepay” model is designed to enable banking giants like JPMorgan and Goldman Sachs to become authorized participants in the fund.
This would allow them to bypass restrictions that currently prohibit them from directly holding Bitcoin or other cryptocurrencies on their balance sheets.
This transformative model was presented jointly by six members of BlackRock and three from Nasdaq during a meeting held on November 28th with the United States Securities and Exchange Commission (SEC).
If granted approval, this development could prove to be a game-changer for Wall Street institutions with trillion-dollar balance sheets, as it opens up a new avenue for their involvement.
Many highly regulated banks are presently barred from directly holding cryptocurrencies.
Under the revised model, authorized participants (APs) would transfer cash to a broker-dealer, which would then convert it into Bitcoin before entrusting it to the ETF’s custody provider, Coinbase Custody in BlackRock’s case.
This arrangement also effectively shifts risk away from APs and places it more in the hands of market makers.
READ MORE: El Salvador’s “Volcano Bonds” Approved for 2024 Launch
Furthermore, BlackRock asserts that this new model enhances resistance to market manipulation, which has previously been a key factor in the SEC’s rejection of spot Bitcoin ETF applications.
Additionally, BlackRock contends that the new ETF structure will bolster investor protections, reduce transaction costs, and promote simplicity and consistency within the broader Bitcoin ETF ecosystem.
According to a filing with the SEC, BlackRock had its third meeting with the SEC, led by Gary Gensler, on December 11.
Notably, this meeting on November 28 with the SEC was a follow-up to an initial meeting held on November 20, where BlackRock introduced its original in-kind redemption model.
The SEC is obligated to make a decision on BlackRock’s application by January 15, with the final deadline set for March 15.
In the meantime, ETF analysts anticipate that the SEC will issue decisions on several pending spot Bitcoin ETF applications sometime between January 5 and 10.
Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, and Hashdex are among the other financial firms eagerly awaiting the SEC’s decisions during this period.
Discover the Crypto Intelligence Blockchain Council
