BlackRock’s New Filling For In-Kind Bitcoin ETF Redemption About to Change BTC ETF ERA

News

BlackRock, one of the world’s largest investment firms managing $11.55 trillion in assets, has recently filed a request with Nasdaq for a rule change that would allow a new redemption model for its Bitcoin exchange-traded fund (ETF), the iShares Bitcoin Trust (IBIT). 

This change would permit an “in-kind creation and redemption,” but only for a select group of Authorized Participants (APs), not for individual investors. What does it Mean?

BlackRock Files For In-Kind Redemption

On Jan 24, a Nasdaq submitted a filing on behalf of BlackRock seeking to permit a new redemption model for the IBIT ETF. This model would allow Authorized Participants (APs) but not individual investors to redeem their shares for actual Bitcoin rather than cash. 

If the rule change is approved, it would mark a significant change in the way Bitcoin ETFs are managed, offering greater efficiency and cost savings for APs.

Currently, the standard redemption model involves cash transactions, but this process often comes with added costs, including bid/ask spreads and broker commissions. 

The new in-kind redemption model would eliminate these costs, making it a more streamlined and efficient process for institutional investors involved in the ETF.

Why The Change Required?

Bloomberg’s Senior ETF Analyst, James Seyffart, expressed his views on the recent filing, stating that BlackRock’s request should have been granted from the start, especially when the IBIT launched in early 2024 alongside other Bitcoin ETFs.

According to Seyffart, this model is not only more efficient but also better for the long-term performance of the ETF.

Another key reason behind this proposed change is its potential tax benefits. Chris J. Terry, Chief Architect at Bitseeker Consulting, noted that in-kind redemptions help minimize capital gains distributions for ETFs. 

By allowing shares to be exchanged for underlying assets, the fund becomes more tax-efficient, benefiting investors in the long run.

BlackRock’s BTC ETF Outperforms Expectations

The move could also reflect BlackRock’s growing dominance in the Bitcoin ETF space. Since the launch of IBIT, the fund has quickly surged past the $50 billion milestone in December 2024, and its holdings have now exceeded $60 billion. 

However, BlackRock’s Bitcoin ETF is undoubtedly one of the most successful, and this new rule change could make it even more attractive to investors.

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