BlackRock pushes for in-kind redemption model in iShares Bitcoin Trust ETF

Notably, its trading venue, the Nasdaq Stock market LLC, has filed for the in-kind redemption model with the United States Securities and Exchange Commission (SEC).

The process allows large institutional investors to buy and redeem shares of the fund directly to Bitcoin (BTC). It allows APs to closely monitor the demand for the ETF and act fast by buying or selling shares of the fund without cash being involved. Retail investors are not eligible to participate.

Nasdaq proposes a rule change to allow in-kind redemption for BlackRock’s Bitcoin ETF

The proposal aims to permit specifically qualified or authorized participants to transfer the trust’s Bitcoin holdings.

If this rule change is approved, authorized participants will be able to redeem their proceeds in BTC instead of cash. The in-kind model is appropriate for most exchange-traded fund products; however, the issuers made compromises in the run-up to last year’s approval as the Gary Gensler-led SEC preferred a cash creation model. 

Detailing what this means for the market, Bloomberg Senior ETF Analyst James Seyffart noted that it won’t mean much for retail traders. He said with in-kind redemption, the entire Bitcoin ETF market will trade more efficiently.

This filing follows BlackRock’s launch of the BTC ETF variant on CBOE Canada.

BlackRock dominates the Bitcoin ETF market

BlackRock is the world’s largest Bitcoin ETF issuer, and its IBIT holdings have already exceeded $60 billion. The Farside Investors’ data shows inflows of $661.9 million on January 21, $344.3 million on January 22, and $154.6 million on January 23, respectively, by current data.

The positive trading milestone of IBIT also extended into January 24. Per market data, it recorded over $2 billion in trading volumes in the first few hours.

Market experts suggest that with BlackRock advocating for in-kind redemption, other crypto ETF issuers may follow suit soon. BlackRock, however, has yet to file for similar in-kind redemption for its Ethereum ETF product. While leading the way in key ETF offerings, it has subtly distanced itself from alternative crypto ETF filings as the trend gains momentum.

Several ETF filings were reported earlier as asset managers woke up to the pro-crypto US SEC. The most recent high-profile filing is the Grayscale Bitcoin Adapters ETF. 

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