BlackRock Meets SEC Over Bitcoin ETF, Approval in the Air?
BlackRock’s Meeting With The SEC
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.
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).
The Purpose of the Meeting
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 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.
BlackRock’s Position
In his post, Seyffart mentioned that BlackRock 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.
The Case for Different Models
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.
Regulatory Compliance is Key
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.
The views of the SEC
The recent series of meetings between BlackRock, Grayscale, and the SEC speaks to the growing likelihood of approval for a Bitcoin ETF. The SEC appears more open to the idea, but it wants to ensure that the regulatory framework is in place before giving its final decision. This cautious approach suggests that while the odds for ETF approval have increased, it is not yet a done deal. As the crypto space continues to evolve, the SEC wants to ensure it is making informed and carefully considered decisions that are for the benefit of investors and the market as a whole.
