Nasdaq files to change BlackRock's Bitcoin ETF to allow for in-kind redemptions

Nasdaq, on behalf of BlackRock, is pursuing a potential change to the asset management firm's spot Bitcoin exchange-traded fund to allow for in-kind redemptions instead of cash.

Nasdaq filed an amended rule filing on Friday that would allow for redemptions and creations in kind for the iShares Bitcoin Trust, according to a Form 19b-4 filing . 

"The Exchange now proposes to amend representations regarding the Trust’s creation and redemption process as set forth in the previous rule filing to list and trade Shares, specifically to allow for in-kind transfers of the Trust’s bitcoin," according to the new filing. "The proposed in-kind transfer process will be an alternative to the Trust’s current cash creation and redemption process." 

Ahead of the SEC's approvals for spot bitcoin ETFs over a year ago, firms were hashing out technical details over how the redemption process would work for such a product. The SEC favored a cash model that required BlackRock to move bitcoin out of storage, sell it right away, and then give the cash back to the investor. 

A potential revised process won’t mean that individual investors will be able to do “in-kind’ redemptions and creations, just the authorized participants involved, said James Seyffart, Bloomberg Intelligence ETF analyst, on Friday in a post on X. 

“Mostly what it means is that ETFs should trade even more efficiently than they already do theoretically because things can be streamlined,” Seyffart said. “In my opinion the ETFs should have been allowed to do this from the get-go but the Dem SEC commissioners were against it.”