Nasdaq has filed an amendment with the U.S. Securities and Exchange Commission (SEC) on behalf of BlackRock’s iShares Bitcoin Trust (IBIT), proposing the inclusion of in-kind creation and redemption mechanisms for its spot Bitcoin exchange-traded fund (ETF).
Understanding in-kind redemptions
In-kind redemptions allow authorized participants—typically large financial institutions—to exchange ETF shares directly for the underlying asset, in this case, Bitcoin, rather than settling in cash. This process can enhance the ETF’s efficiency by reducing transaction costs and minimizing potential tax implications.
Implications for the ETF market
Implementing in-kind redemptions is expected to streamline operations for the ETF, leading to more efficient trading and potentially tighter bid-ask spreads. However, it’s important to note that this mechanism primarily benefits authorized participants and may not directly impact individual retail investors, who will continue to transact in cash.
Next steps
The proposed amendment is currently under review by the SEC. If approved, it could set a precedent for other Bitcoin ETFs to adopt similar mechanisms, further integrating cryptocurrency into traditional financial products.
As the regulatory landscape evolves, stakeholders will be closely monitoring the SEC’s decision and its potential impact on the broader adoption of Bitcoin ETFs.
