The U.S. SEC requires that the number of intermediaries in spot Bitcoin ETFs be minimized as much as possible when using cash redemptions, to make them more controllable

In an interview, Eric Balchunas, a senior ETF analyst at Bloomberg, stated that many ETF applicants have updated their filings using a cash creation redemption model. As of December 22nd, the applications of seven applicants were set for cash creation while the registration statements of another seven included both cash and in-kind models. Most existing ETFs involve in-kind creations which means when intermediaries want to issue new shares of an ETF they use actual assets like Bitcoin to provide funds to companies like BlackRock. This is how 90% of ETFs work - in kind. Only 10% are cash.

 

ETF analysts believe that the reason why the U.S SEC wants spot Bitcoin ETFs to adopt a cash model is because they want to minimize the number of intermediaries who can obtain actual Bitcoins during the redemption and issuance process. The U.S Securities and Exchange Commission hopes to "further close the loop" and reduce money laundering issues.