- Nasdaq seeks SEC approval for in-kind redemption in BlackRock’s Bitcoin ETF, streamlining efficiency.
- In-kind model boosts tax efficiency and transparency, benefiting institutional Bitcoin ETF investors.
- BlackRock’s Bitcoin ETF leads with $39B inflows, facing competition from Grayscale and CoinShares.
Nasdaq has filed a request with the SEC to amend rules for BlackRock’s spot Bitcoin ETF. The proposal seeks to allow in-kind creation and redemption of shares. This adjustment aims to improve the efficiency of the iShares Bitcoin Trust (IBIT).
Efficient Model to Simplify ETF Operations
The in-kind redemption model allows institutions to directly exchange Bitcoin for shares without cash transactions. This approach eliminates bid spreads and reduces brokerage fees, streamlining the overall process. ETF analyst James Seyffart noted that BlackRock should have implemented this model from the start.
Nasdaq stated that the model benefits authorized participants, institutions that create and redeem fund shares. These participants can use Bitcoin or cash to create shares and receive the same for redemptions. This process enhances operational efficiency while maintaining liquidity for the ETF.
Chris J. Terry of Bitseeker Consulting clarified that the in-kind model mainly benefits institutional investors. Individual investors cannot directly participate in in-kind creation or redemption. They will still rely on the cash model for all transactions.
Impact on ETF Tax Efficiency and Transparency
The in-kind redemption model also improves tax efficiency by reducing capital gains distributions. This ensures a smoother process for institutions and lowers tax burdens for ETF holders. Analysts believe this feature could increase investor confidence in ETFs.
Crypto analyst MartyParty highlighted the transparency offered by the in-kind model. The model allows on-chain records of transactions, which promotes trust and accountability. This change could encourage more institutional interest in cryptocurrency investments.
BlackRock’s ETF Growth Amid Competition
BlackRock’s iShares Bitcoin Trust has experienced significant growth since its launch in January 2024. The ETF has attracted over $39 billion in inflows, making it the largest US spot Bitcoin ETF. Analysts believe the proposed amendment could further boost the ETF’s appeal to institutions.
Meanwhile, other firms continue to file for crypto ETFs, intensifying market competition. On the same day as Nasdaq’s filing, CoinShares applied for Litecoin and XRP ETFs. Grayscale also proposed converting its Solana and Litecoin Trusts into ETFs.
The Nasdaq filing represents a push for greater efficiency and accessibility in cryptocurrency investment products. If approved, the in-kind redemption model could set a standard for the industry. This development reflects growing institutional interest in innovative and efficient financial products for digital assets.
