BlackRock’s proposed Bitcoin exchange-traded fund (ETF) has officially been assigned the ticker IBIT, as disclosed in an S-1 filing amendment submitted to the Securities and Exchange Commission (SEC). The filing also outlined BlackRock’s decision to adopt a cash redemption model for its Bitcoin ETF. While the company had initially considered the possibility of “in-kind” redemptions, the latest document reflects a shift towards the SEC’s preference for cash transactions, a point emphasized in recent discussions between BlackRock and the Commission. According to the filing’s Creation and Redemption section, the Trust will issue and redeem Baskets continuously, with these transactions conducted exclusively in exchange for cash. The document specifies that Baskets will be issued or redeemed for an amount of cash determined by the Trustee on each trading day when NASDAQ is open for regular trading.
Cash Redemption Model vs In-Kind Redemption Model
Under the cash creation and redemption model, investors are required to use cash for transactions in exchange for Bitcoin holdings. In contrast to most ETFs, investors cannot submit Bitcoin in exchange for ETF shares, as highlighted by Bloomberg Intelligence ETF analyst Eric Balchunas.
This cash redemption model marks a departure from BlackRock’s earlier proposal of an in-kind model. In the cash redemption approach, investors engage in direct cash transactions when buying and exiting Bitcoin ETFs. In contrast, the in-kind model suggests that investors would receive the specific assets they invested in, such as Bitcoin, when they choose to exit. In this scenario, investors buy Bitcoin ETFs with cash and sell them to acquire actual Bitcoins.
Balchunas commented, “BlackRock has gone cash only. That’s basically a wrap. Debate over. In-kind will have to wait. It’s all about getting ducks in a row before holidays. Good sign.”
ARK Invest and 21Shares Bitcoin ETF Also Adopts Cash Redemption
Meanwhile, ARK Invest and 21Shares have similarly adjusted their spot Bitcoin filing to align with the SEC’s directive of embracing the cash creation and redemption model, particularly in the initial phase of issuance.
Regarding spot Ethereum ETFs, the SEC’s decision on the applications from ARK Invest and 21Shares has encountered a delay. The initial deadline for this decision was set for December 26, but the final determination date has now been pushed to May 2024.
