Nasdaq has submitted an amended rule proposal to the Securities and Exchange Commission (SEC) seeking approval for in-kind redemptions in BlackRock's iShares Bitcoin ETF (IBIT), as revealed in a January 24 regulatory filing.
The proposed change would allow the ETF to directly transfer Bitcoin to investors during redemptions, offering an alternative to the current cash-only model. Under the existing system, the fund must first convert Bitcoin holdings to cash before returning proceeds to investors.
This modification aims to streamline the redemption process and potentially reduce tax implications for institutional participants. The filing states that the in-kind transfer option would operate alongside the current cash creation and redemption system, giving investors more flexibility.
The move marks a notable shift in Bitcoin ETF operations since their regulatory approval. The initial cash-based structure was chosen for its regulatory clarity, but market participants have expressed interest in more efficient redemption methods.
If the SEC approves this amendment, BlackRock's ETF could establish a new standard for the industry, potentially encouraging other Bitcoin ETF providers to pursue similar operational changes. The decision could influence how traditional financial products interact with digital assets moving forward.
The timeline for SEC review and potential approval remains unclear, as regulators continue to evaluate the evolving landscape of cryptocurrency-based investment products.