- Nasdaq files for in-kind redemption rule for BlackRock Bitcoin ETF, boosting efficiency.
- BlackRock’s Bitcoin ETF attracts $40B in its first year, leading the crypto ETF market.
- Proposed in-kind model for ETFs minimizes costs and enhances tax efficiency for APs.
Nasdaq has proposed a rule change to the SEC that would allow in-kind creation and redemption of the BlackRock iShares Bitcoin Trust (IBIT), allowing institutional investors to purchase or sell shares in Bitcoin instead of the initial cash redemption process.
In-Kind Redemption Model Explained
The proposed in-kind creation and redemption model is designed to improve the efficiency of ETF transactions. Under this model, APs can use Bitcoin to create shares or receive Bitcoin when redeeming shares. This process eliminates the need for cash, which helps avoid bid/ask spreads and broker commissions. The in-kind method allows APs to monitor and react swiftly to market demand. However, individual investors remain restricted to cash-based transactions and cannot participate in the in-kind process.
This model also enhances ETFs’ tax efficiency. By allowing the exchange of shares for underlying assets, ETFs can minimize capital gains distributions, benefiting investors holding shares in the fund. According to James Seyffart, a Bloomberg ETF analyst, the shift would streamline transactions, resulting in fewer steps and parties involved.
IBIT’s Performance and Market Impact
BlackRock’s IBIT, the largest spot Bitcoin ETF in the U.S., continues to lead the market with impressive inflows. The ETF attracted nearly $40 billion in its first year, making it the most successful debut in ETF history. Despite initial limitations on in-kind transactions, IBIT has demonstrated substantial market traction, showing that demand for crypto-focused ETFs is significant.
Nasdaq’s filing aims to improve IBIT status by offering tax-advantageous trading alternatives for institutional investors, amidst increasing applications for Crypto ETFs like Litecoin and XRP.
Implications for the Broader ETF Market
The filing also reflects broader trends within the crypto ETF space. Since the SEC approved the launch of spot Bitcoin ETFs with cash creation and redemption mechanisms in January 2024, there has been increasing support for more streamlined and efficient transaction methods. Industry experts believe that in-kind redemptions could lead to more transparent and effective Bitcoin ETF operations while also enhancing liquidity and market stability.
The SEC’s response to Nasdaq’s proposed rule change will be closely watched, as it could pave the way for similar innovations in other crypto-based ETFs.
The post Nasdaq Files for In-Kind Creation Model in BlackRock iShares Bitcoin Trust appeared first on Cryptonewsland.
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