Nasdaq has presented a proposition to the US Securities and Exchange Commission (SEC) to permit in-kind creation and redemption for BlackRock’s iShares Bitcoin ETF (IBIT).
This appeal, submitted on January 24, aims to revise the ETF’s operational structure to facilitate direct Bitcoin transactions in conjunction with the current cash-based system.
BlackRock Bitcoin ETF Inflow Streak Aligns With Nasdaq’s In-Kind Initiative
The suggested in-kind approach would streamline the ETF’s creation and redemption process, minimizing the number of intermediaries involved. Nevertheless, this feature would be limited to institutional investors, excluding retail participants from the in-kind mechanism.
If sanctioned, the alteration would enable authorized participants (APs) to conduct transactions in Bitcoin rather than converting the asset to cash. This technique presents potential advantages, including tax efficiency, enhanced price correlation with Bitcoin’s market value, and a more efficient process.
“BTC ETFs are about to become more efficient akin to European ETPs. Authorized Participants can now create and redeem directly with Bitcoin instead of solely relying on cash,” stated crypto analyst Tom Wan.
James Seyffart, an ETF analyst at Bloomberg, emphasized the operational effectiveness of this model. He pointed out that in-kind transfers entail fewer stages and participants compared to the cash-based approach, which should result in smoother ETF trading. This efficiency could notably boost the attraction of Bitcoin ETFs for institutional investors.
“What it implies is that ETFs should trade even more effectively than they already do theoretically because operations can be optimized,” Seyffart mentioned.
The proposal from Nasdaq indicates an increasing demand for more versatile ETF frameworks. When spot Bitcoin ETFs were initially introduced in January 2024, the SEC mandated issuers to adopt only a cash redemption model because the regulator “didn’t want brokers interacting with actual Bitcoin,” according to Seyffart.
However, as the market evolves, the push for in-kind transfers has intensified, with supporters arguing that they align more closely with the decentralized characteristics of digital assets.
The submission coincides with a significant growth period for IBIT. According to data from SoSoValue, the ETF has recently garnered over $2 billion in new inflows over a six-day period.
Since its introduction, IBIT has amassed $39.7 billion in inflows, solidifying its status as the leading spot Bitcoin ETF in the US.
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