As the U.S. Securities and Exchange Commission (SEC) reviews filings for spot Bitcoin exchange-traded funds (ETFs), it is insisting on a “cash” redemption model rather than alternative models proposed by issuers like BlackRock. Invesco, the latest ETF applicant, has now agreed to use a cash creation and redemption model for its ETF. The SEC has been pushing for this model, which involves transactions being conducted in cash, while some applicants have suggested using an “in-kind” model.
There are two ways to create and redeem shares in an ETF: cash creation/redemption and in-kind creation/redemption. In a cash creation model, the authorized participant deposits cash equivalent to the net asset value of the creation units, which is then used to purchase the underlying assets, such as Bitcoin. In an in-kind creation model, the participant deposits a basket of securities that matches the ETF’s portfolio, allowing the fund to issue creation units without immediately selling the securities for cash.
The cash creation model is seen as more efficient as it avoids bid and ask spreads and broker commissions, but the in-kind model provides more flexibility for fund participants. However, the SEC seems to be firm on only allowing cash creation for spot Bitcoin ETFs. Bloomberg senior ETF analyst Eric Balchunas believes that BlackRock’s attempt to sway the regulator on in-kind creation may not be successful, and others may have to follow Invesco’s lead in adopting the cash creation and redemption model.
It is worth noting that the SEC recently delayed its decision on a spot Ether ETF for Invesco and Galaxy Digital. Several asset managers, including BlackRock, Grayscale, and Fidelity, have been meeting with the SEC to finalize the details of their spot BTC products, with analysts expecting a batch approval in early January.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | James Seyffart, Brett Harrison, X Hall, Eric Balchunas, Scott Johnsson |
| Companies | SEC, Galaxy Digital, BlackRock, Bitwise, Invesco |
| Currencies | Lido Staked Ether, Bitcoin |
| Securities | None |
