BlackRock Bitcoin ETF Shifts Risk to Crypto Market Makers, Not Banks

BlackRock is planning to make it easier for Wall Street banks to get involved in its Bitcoin ETF, should it become approved. The plan involves transferring the risk to crypto market makers. This novel approach aims to simplify the process of redeeming shares in the ETF, as disclosed in a memo shared by the SEC about a meeting between BlackRock, Nasdaq, and the Commission.

The SEC has not yet made a decision on BlackRock’s iShares Bitcoin Trust (IBTC) application, but analysts predict a decision will be made between Monday, January 8 and Wednesday, January 10. The BlackRock-Nasdaq-SEC meeting in late November was a follow-up to a previous meeting, during which the securities regulator expressed concerns over BlackRock’s model for share redemption. The proposed T+1 settlement, which would require settlement within one Business day, is timely given the SEC’s recent approval of new rules for stock and ETF settlement.

The new model for share redemption would involve crypto market makers initiating the process by sending cash to the broker dealer, streamlining the involvement of authorized participants, such as large Wall Street banks. This approach is aimed at providing superior resistance to market manipulation, a primary concern for the SEC. It is also expected to bring greater simplicity and harmonization across the ecosystem.

Notably, historic context is provided, with mention of the elusive nature of a Bitcoin ETF in the U.S. market for over a decade, and the expected large influx of capital into crypto markets should such a product be approved.

In conclusion, the revised redemption model from BlackRock is anticipated to pave the way for more institutional investment in the Bitcoin ETF, ultimately shaping the future of crypto investment.

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