Nasdaq has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) seeking approval for in-kind creation and redemption for the BlackRock iShares Bitcoin Trust (IBIT). This adjustment, outlined in a recent filing, would allow large institutional investors—referred to as authorized participants (APs)—to trade fund shares directly in bitcoin (BTC) rather than using cash.
This innovative approach aims to enhance efficiency by enabling APs to track demand for the exchange-traded fund (ETF) more closely and respond swiftly to market changes. Instead of relying on cash transactions, which can introduce delays, this mechanism allows for immediate adjustments through bitcoin transactions. However, retail investors remain excluded from participating in this process, as it is designed specifically for institutional actors.
The SEC’s initial approval of spot bitcoin ETFs, including BlackRock’s IBIT, came in January of last year. At that time, the regulator restricted the funds to cash-based redemptions rather than direct bitcoin transactions. The decision was met with criticism, particularly from industry insiders. As Bloomberg Intelligence ETF analyst James Seyffart remarked, “It should have been approved in the first place, but Gensler and Crenshaw didn’t want to allow it for a whole host of reasons they gave. Mainly, they didn’t want brokers touching actual Bitcoin.”
BlackRock’s IBIT has already proven to be a standout in the market. In its debut year, the fund attracted nearly $40 billion in inflows, securing its position as the most successful ETF launch in history. This record-breaking performance underscores the growing demand for institutional-grade bitcoin investment vehicles.
If approved, the proposed rule change could mark a significant evolution in the structure of bitcoin ETFs, potentially setting a new industry standard. By incorporating in-kind redemptions, Nasdaq and BlackRock aim to provide a more seamless and cost-effective option for institutional investors, further cementing bitcoin’s place within the broader financial landscape.
This development reflects a broader trend of increasing institutional adoption of cryptocurrencies, a shift that has fueled optimism for the future of digital assets. While challenges remain, such as regulatory scrutiny and market volatility, proposals like this one demonstrate the ongoing efforts to integrate bitcoin into traditional financial systems.