Nasdaq has filed an amended rule proposal seeking to introduce in-kind redemptions for BlackRock’s iShares Bitcoin ETF (IBIT), according to a Jan. 24 regulatory filing.
The exchange traded fund would be able to directly transfer Bitcoin (BTC), to the investors at redemption time, rather than converting their holdings into money.
The filing outlines plans to expand the ETF’s creation and redemption processes to include in-kind transfers as an alternative to the existing cash model. This could increase efficiency and decrease tax burdens on institutional investors.
As per the document:
“The proposed in-kind transfer process will be an alternative to the Trust’s current cash creation and redemption process.”
The change represents a significant shift in Bitcoin ETFs’ operational strategies. The original cash-based redemption required that issuers such as BlackRock liquidate Bitcoin and then return cash proceeds to their investors. This structure added additional complexity and could lead to tax inefficiencies.
The release of this update coincides with the increased anticipation surrounding spot Bitcoin ETFs that were approved by regulators over a decade ago.
Cash versus in-kind redemptions have long been the subject of debate between issuers and Securities and Exchange Commissions (SECs). Initially, the SEC favored cash because it was perceived as simpler and more regulated.
The amended filing reflects Nasdaq’s intent to align with market demand for more flexible and investor-friendly ETF operations.
If the iShares Bitcoin ETF is approved, it could serve as a precedent that other issuers will adopt similar approaches. This would further advance the integration of digital currencies into traditional financial instruments.
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