BlackRock, ARK Invest update Bitcoin ETF plans

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On December 18, investment firms BlackRock and Cathie Wood’s ARK Invest revised their S-1 registration filings with the U.S. Securities and Exchange Commission (SEC) for a potential Bitcoin exchange-traded fund (ETF).

They have chosen a cash-based system for creating and redeeming shares instead of non-monetary payments like Bitcoin, as per the SEC’s requirements.

ARK’s registration statement suggested that its ARK 21Shares Bitcoin ETF might primarily involve cash for creating and redeeming shares. However, the document noted the possibility of allowing authorized participants to use non-monetary transactions, subject to regulatory approval, for creating and redeeming shares.

BlackRock later submitted a similar update, highlighting that in-kind transactions could occur, pending regulatory approval.

“These transactions will take place in exchange for cash. Subject to The Nasdaq Stock Market LLC (“NASDAQ”) receiving the necessary regulatory approval to permit the Trust to create and redeem Shares in-kind for bitcoin (the “In-Kind Regulatory Approval”), these transactions may also take place in exchange for bitcoin,” said BlackRock in its Amendment No. 3 to Form S-1 registration statement.

In response to ARK’s update, Bloomberg’s ETF analyst Eric Balchunas emphasized that ARK and its ETF partner 21Shares initially avoided cash creations and found a different way to handle in-kind redemptions.

In a social media post, Balchunas said, “So if they surrender, that tells you SEC not budging, the debate is over, which is probably good if you are looking for January approval.”

The SEC’s “cash-only” rule implies that authorized participants (AP) can acquire additional shares of the ETF solely by providing the required amount of cash, as said by investor and consultant Vance Harwood.

“Some funds allow ‘in-kind’ creations too. For in-kind creations, the AP brings the asset that the ETF tracks and exchanges it for ETF shares. Apparently, the SEC is not keen on allowing this for spot Bitcoin ETFs,” Harwood said.

He highlighted the SEC’s stance as “understandable,” explaining that it clarifies the ETF’s source of underlying Bitcoin—by purchasing them, presumably from reputable exchanges. In contrast, allowing in-kind transfers would obscure the origin of the transferred Bitcoin.

In addition to BlackRock and ARK, global ETF provider WisdomTree also submitted an S-1 amendment for its spot Bitcoin ETF, the WisdomTree Bitcoin ETF, retaining the option for in-kind creation and redemption.

“Authorized participants, acting on the authority of the registered holder of shares, may surrender baskets in exchange for the corresponding amount of Bitcoin or cash,” the WisdomTree’s registration statement reads.

In mid-December, finance lawyer Scott Johnsson anticipated that ETF applicants would ultimately need to adopt a cash creation and redemption model for their ETFs. Earlier, Invesco and Galaxy, both ETF applicants, also revised their S-1 registration statements to comply with the cash-only model.

Bitcoin hits $43,100 as SEC considers spot Bitcoin ETFs

Bitcoin has surged more than five percent to reach $43,100 on Tuesday. During a meeting between the SEC and BlackRock, the spotlight turned to discussions about Spot Bitcoin ETFs, indicating a growing interest.

Jan van Eck, Vaneck’s CEO, is optimistic about the simultaneous approval of multiple spot Bitcoin ETF applications by the SEC. During an interview, van Eck stressed Bitcoin’s growing user base and forecasted its superior performance compared to gold.

On the other hand, SEC chairman Gary Gensler shared that the agency is reviewing eight to twelve Bitcoin ETF filings. He emphasized how recent court rulings are affecting the SEC’s decision-making.

“We had in the past denied a number of these applications, but the courts here in the District of Columbia weighed in on that. And so we’re taking a new look at this based upon those court rulings,” Gensler said.