Bitcoin Spot ETF: What Was The Result Of The Meeting Between The SEC And BlackRock?

Bloomberg Analyst James Seyffart recently confirmed that the asset manager BlackRock had met with the Securities Exchange and Commission (SEC). The analyst also provided insights as to what the meeting was about, as many continue to speculate that approval may be near.

BlackRock’s Meeting With The SEC

In a post on his X (formerly Twitter) platform, Seyffart confirmed that BlackRock specifically met with the SEC’s division of trading and markets. This division is responsible for approving or denying proposed rule changes. Interestingly, the meeting took place on the same day that Grayscale met with the SEC (November 20).

According to the SEC memorandum, the purpose of the meeting was to discuss NASDAQ’s proposed rule change to list and trade shares of the iShares Bitcoin Trust (BlackRock’s proposed Spot Bitcoin ETF).

Attached to the memorandum were slides that bordered on in-kind and cash creation, suggesting that that was what was the main focus of the discussion.

Between The In-Kind And Cash Creation Model

As Bloomberg Analyst Eric Balchunas earlier suggested, the SEC seems to prefer a ‘cash creates’ model as against in-kind. Balchunas had also stated that the SEC was advising exchanges to adopt cash creates for these ETFs. In line with this, it is not far-fetched that the Commission was possibly advising BlackRock to reconsider its position. 

In his post, Seyffart mentioned that BlakRock seems to prefer in-kind for their Spot Bitcoin ETF. He believes that this makes sense as it is probably the “cleanest structure for them and end investors”. However, the asset manager would need to consider the SEC’s stance, especially considering that they could risk delay if they don’t adjust, as Balchunas warned.

Balchunas also made a case for the cash-creating model. He highlighted the fact that broker-dealers can’t deal in Bitcoin. Therefore, a cash creates model puts the onus on issuers to transact in Bitcoin and keeps these brokers from dealing with unregistered subsidiaries or third-party firms. 

On the other hand, he noted why these issuers and investors would prefer an in-kind model, as it is arguably better in terms of the spread and taxation. Due to the preference for the in-kind model, only 2-3 filers are said to have planned cash creates. However, seeing the position of the SEC, these filers could soon make amendments to their prospectus. 

Irrespective of the differences, it would seem that the SEC is more open to approving these funds. However, the Commission seems to be ensuring that there is regulatory compliance on the part of these filers before it proceeds with any approval. 

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