BlackRock, WisdomTree, and Ark Amends Bitcoin ETF Plans to Comply with SEC’s Cash-Only Framework

Major US asset managers intending to issue Bitcoin spot ETFs are revising their ETF filings as they hope for the SEC's blessing to list the product.

According to the latest reports, BlackRock, Cathie Wood's ARK, and WisdomTree are adjusting their filings to comply with the cash redemption model mandated by the U.S. SEC. Notably, Cathie Wood's ARK Invest and BlackRock have already adjusted their S-1 registration statements.

BlackRock and Ark Invest Willing to Make Necessary Adjustments for Speed Bitcoin ETF Approval

BlackRock and ARK's S-1 registrations with the U.S. SEC, amended on December 18, show the investment managers' willingness to accept the cash redemption system. This system will be used instead of the initially proposed in-kind redemptions, which typically apply to non-monetary payments like Bitcoin.

ARK's filing. Suggested that the ARK 21Shares Bitcoin ETFZ will only permit cash creations and redemptions. However, the document also mentioned the potential creation and redemption of shares using in-kind transactions.

However, the plan is subject to approval from regulators.

Similarly, BlackRock's filing carries provisions for non-cash transactions, which are still subject to the SEC's approval.According to BlackRock's iShares Trust ETF S-1 amendments, these transactions will take place in cash but may also be in exchange for Bitcoin.

However, it will depend on the Nasdaq Stock Market getting the necessary approval to create and redeem shares in kind for Bitcoin.

I know for fact ARK/21Shares did NOT want to do cash creations, even worked out a creative alt way to do in-kind.. so if they surrendering that tells you SEC not budging, debate is over, which is prob good if you looking for Jan approval bc we at 11th hour, holidays about to hit

- Eric Balchunas (@EricBalchunas) December 18, 2023

Also, Bloomberg ETF analyst Eric Balchunas stated that ARK and its partner 21Shared did not want cash creations. Instead, they prefer in-kind redemptions. However, the SEC has refused to compromise its position for cash creation.

Balchunas believes that if ARK compromises to please the SEC, BlackRock will likely follow, and the faster this happens, the faster Bitcoin ETF approval will be.

Investor Believes That The SEC's Positions Is Understandable

Reacting to this development, prominent investor Vance Harwood said the SEC's stance on the Bitcoin ETF approval is understandable. In-cash transactions imply that eligible participants can only acquire more ETF shares if they are able to submit the specified amount of money, according to Harwood.

"Cash only" means that the authorized participants (APs), the entities that directly interact with the Exchange Traded Funds (ETF), will only be able to obtain more shares (this is called share creations) of the ETF by bringing the appropriate amount of cash to the table. For... https://t.co/lBsEgCKmi4

- Vance Harwood (@6_Figure_Invest) December 19, 2023

Harwood refers to the process as shared creations and provides practical examples to back his assertions. He noted that the SEC is not keen on adding in-kind creation to Spot Bitcoin ETF, which he thinks is understandable since it will make the transaction transparent.

So, the ETFs will be forced to buy from accredited exchanges, allowing for easier tracking. However, if in-kind transfers are allowed, then it will be impossible to track the source of the Bitcoin.

During share redemptions, the same restrictions will most likely apply.

Hartwood noted that the impact of cash on the Bitcoin ETFs is minimal, although it slightly increases the number of transactions. Wisdom Tree also filed for an S-1 adjustment to its application but kept the in-kind redemption and creation option open pending approval.

Given the latest developments, the Bitcoin ETF approval has proceeded to a clearer phase, with many optimistic that it could happen shortly after the holidays.

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