BlackRock Amends Bitcoin ETF Proposal to Facilitate Wall Street Involvement
Summary:
BlackRock has amended its Bitcoin exchange-traded fund (ETF) application to enable Wall Street banks to participate more easily by creating new shares in the fund with cash instead of just crypto. The novel "prepay" arrangement was presented to the Securities Exchange Commission (SEC) and, if approved, could be a game-changer for highly regulated banks seeking to engage in the crypto market. The revised model laterally transfers risk from authorized participants to market makers. BlackRock maintains that this system strengthens investor protections, reduces costs, and promotes simplicity and consistency across the Bitcoin ETF ecosystem.
BlackRock has adjusted its proposal for a Bitcoin (BTC) exchange-traded fund (ETF) to make it more accessible for major banks like JPMorgan and Goldman Sachs. By enabling the creation of new shares in the fund with cash instead of solely crypto, the revised "prepay" structure circumvents regulations that prohibit banks from holding Bitcoin or other cryptocurrencies directly on their books. BlackRock teamed up with NASDAQ to present this updated prepay model to the United States Securities Exchange Commission on November 28. If given approval, the adjustment could open doors for banks with multi-trillion dollar balance sheets seeking to enter the crypto space without the ability to hold Bitcoin directly. In the updated arrangement, authorized participants (APs) would transfer money to a broker-dealer, who would then convert the cash to Bitcoin before being stored by the ETF's custodian, in this case, Coinbase Custody. A critical feature of this new structure is that the risk is transferred from APs to the hands of market makers. On top of this, BlackRock also stated that the prepay model provides better safeguards against market manipulation, enhances investor protection, reduces transaction expenses, and promotes simplification and consistency across the Bitcoin ETF spectrum. Only two weeks after the November 28 rendezvous, BlackRock had another meeting with the SEC on December 11, as recorded by a recent SEC filing. BlackRock had also met with the SEC initially on November 20 to introduce its original prepay model concept. The SEC, which has yet to approve BlackRock's application, has a decision deadline of January 15, with a final cut-off date of March 15. Meanwhile, ETF experts are predicting the SEC to rule on various pending Bitcoin ETF applications between January 5-10. Other finance firms including but not limited to Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, and Hashdex are also awaiting the SEC's decisions within that specified timeframe.
Published At
12/13/2023 3:10:48 AM
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