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Major Bitcoin Spot ETF Filings Revised to Meet SEC’s Cash Redemption Demands

BlackRock and ARK Invest File Amendments in Push for Approval

Two major fund firms have revised the structure of their proposed physically backed Bitcoin ETFs in response to demands from US regulators. Asset management giant BlackRock and investment firm ARK Invest have both updated their filings to meet the Securities and Exchange Commission’s (SEC) requests for cash redemption options.

The SEC is nearing a deadline of January 10th to approve or reject applications for Bitcoin spot ETFs. In amendments to their earlier filings,BlackRock and ARK have switched from proposed in-kind redemption models to cash redemption options, as insisted upon by regulators.

Cash Redemption Model Enforced by SEC

BlackRock, the world’s largest asset manager by assets under management, has amended its ETF proposal “to provide for cash creations and redemptions in a customary manner,” according to an SEC filing cited by The Block. The SEC appears intent on enforcing the cash redemption model to maintain oversight over the redemption process, avoiding direct broker involvement with Bitcoin.

Previously, BlackRock and Grayscale Investments had proposed in-kind redemptions, which would have allowed investors to redeem shares for actual Bitcoin holdings. However, cash redemptions convert Bitcoin assets into cash to pay out redeeming investors.

Potential Impact on Cost and Performance

The enforced cash redemption model could impact the economics of a Bitcoin ETF, making the product more expensive due to higher transaction costs compared to a traditional in-kind redemption model. However,Matt Hougan of Bitwise Asset Management argued that while not ideal, cash redemption was not a “showstopper” for launching a Bitcoin ETF, with the most important factor being approval or rejection of such a product.

Overall, it remains to be seen if the SEC will approve a Bitcoin spot ETF by its January deadline, but major fund firms are pulling out all the stops to launch the long-awaited investment vehicle.

Will a Spot Bitcoin ETF Finally Launch in 2022?

With the revised filings falling in line with the SEC’s demands, a Bitcoin spot ETF approval looks more likely than ever. But the SEC continues to voice concerns around the potential for market manipulation and the ability to oversee such an investment product. The outcomes of these latest filings will be watched closely for indications of whether the SEC is moving closer to the green light for a spot Bitcoin ETF. Stay tuned for updates.


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