Cryptocurrency

Bitcoin ETF

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 <p class="paragraph">Proponents of spot Bitcoin ETFs have discussed, with the Securities and Exchanges Commission (SEC), which redemption <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> to pick. While institutions seem to favor an ‘in-kind’ redemption, the SEC signals a preference for a ‘cash-only’ <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>.</p>
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 <p class="paragraph">Notably, BlackRock Inc. (NYSE: BLK) employees met with the authorities on November 28, according to a <em>TheBlock</em> report. In this meeting, the company presented a plan for what it called a ‘Revised In-Kind’ redemption <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>.</p>
 <p class="paragraph">Essentially, the revised proposal would give all parties more flexibility for investors to redeem their ETF share worth. This model also offers tax advantages for BlackRock’s iShares and its custodian, Coinbase.</p>
 <p class="paragraph">However, the SEC has signaled an adversary position for that possibility, favoring redemptions exclusively in ‘cash.’</p>
 <h2 class="wp-block-heading" id="h-spot-bitcoin-etf-redemption-models-in-kind-or-cash-only">Spot Bitcoin ETF redemption models: ‘in-kind’ or ‘cash-only’</h2>
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 <p class="paragraph">At its core, the redemption models define what investors will receive when they disinvest from the fund. Redemption only applies for direct deals within the funds manager – like BlackRock – and not for exchange trades.</p>
 <p class="paragraph">First, the in-kind model would mean investors redeem Bitcoin (BTC) in exchange for their ETF shares. In this context, the asset manager would pass the liquidation risk on to investors, as well as all tax obligations for selling the BTC.</p>
 <p class="paragraph">This has been deemed counterintuitive, considering investors had previously bought their shares in U.S. Dollars (USD), not Bitcoin. If these investors want to keep the BTC themselves, they can directly purchase the cryptocurrency on the spot instead of paying the manager’s fees for the ETF.</p>
 <p class="paragraph">On the other hand, the cash-only model would force the fund’s manager to liquidate the redeemed amount, selling Bitcoin and paying investors back in the same currency they first opted in, which is cash.</p>
 <h2 class="wp-block-heading" id="h-etf-experts-comment-on-the-different-redemption-models">ETF experts comment on the different redemption models</h2>
 <p class="paragraph">Matt Walsh, a general partner at Castle Islands Ventures, believes in a 0% chance of the SEC approving the in-kind redemption <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>.</p>
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    <p lang="en" dir="ltr">This is a really thoughtful comment letter to the SEC on why the in-kind <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> is superior to the cash-<a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> for the Bitcoin ETF. Unfortunately I give it 0% chance that the SEC approves an in-kind <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> at this point, it will be cash. Higher financing costs, less efficient…</p>— Matt Walsh (@MattWalshInBos) December 13, 2023
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 <p class="paragraph">Meanwhile, the Senior ETF analyst for <em>Bloomberg</em>, Eric Balchunas, explained why the U.S. agency would prefer the cash-only model.</p>
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    <p lang="en" dir="ltr">The reason the SEC wants cash creates only is this means only the ETF issuer handles btc and not the intermediaries (registered broker dealers can't). They prob also not comfy w them having unregistered broker dealer subsidiaries handle either (bc they not registered).</p>— Eric Balchunas (@EricBalchunas) December 14, 2023
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 <p class="paragraph">Interestingly, both experts signal a personal preference towards a revised in-kind redemption <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>. Either way, this recent news suggests a spot Bitcoin ETF approval could be just around the corner.&nbsp;</p>
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<p>Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/different-spot-bitcoin-etf-models-what-will-the-sec-pick-tbt73716.html">https://thebittimes.com/different-spot-bitcoin-etf-models-what-will-the-sec-pick-tbt73716.html</a></p>

Different spot Bitcoin ETF models; What will the SEC pick?

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