On November 20, 2023, a critical meeting was held between the United States Securities and Exchange Commission (SEC) and representatives from BlackRock, Inc., and the Nasdaq Stock Market LLC. The meeting’s primary focus was the discussion of the iShares Bitcoin Trust and its potential listing on Nasdaq as a spot Bitcoin exchange-traded fund (ETF).
The SEC’s Division of Trading and Markets hosted the meeting, attended by key personnel including David Shillman, Tom McGowan, Randall Roy, Ray Lombardo, Molly Kim, Edward Cho, Sarah Schandler, and Stacia Sowerby. Representing BlackRock were Rachel Aguirre, Adithya Attawar, Shannon Ghia, Robert Mitchnick, Charles Park, Marisa Rolland, and Ben Tecmire. Additionally, Eun Ah Choi, Jonathan Cayne, Giang Bui, and Ali Doyle represented The NASDAQ Stock Market LLC.
BlackRock’s presentation to the SEC included a detailed exposition of two potential models for the iShares Bitcoin Trust: the “In-Kind Redemption Model” and the “In-Cash Redemption Model.” These models outlined the mechanics of how the ETF could operate, focusing on the redemption process involving market makers, bitcoin custodians, and various exchanges.
The In-Kind Redemption Model entails a process where the ETF issuer instructs the Bitcoin Custodian to release bitcoin to a market maker, who may then unwind the bitcoin position. This model involves various parties, including a U.S. Registered Broker/Dealer, spot crypto exchanges, and a listing exchange.
The In-Cash Redemption Model, on the other hand, involves the ETF issuer trading with the market maker to sell bitcoin for USD. This model includes additional steps involving the Bitcoin Custodian moving cash out of cold storage and the market maker delivering shares to the Transfer Agent via an Authorized Participant.
The SEC’s response to BlackRock’s presentation and proposed models remains unclear, with no information on whether the SEC plans to approve the listing of a spot Bitcoin ETF. The approval of such an ETF would represent a major milestone in the acceptance of cryptocurrency in mainstream financial markets.
This meeting comes amid ongoing reviews by the SEC of various proposals for spot crypto ETFs from several firms, including Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck, and Bitwise, alongside BlackRock. The push for a spot Bitcoin ETF has seen several delays and denials, creating a sense of anticipation and uncertainty in the crypto and financial markets.
The SEC has also met with executives from Grayscale on the same day to discuss their proposal for a Bitcoin ETF. The meeting with BlackRock and the ongoing reviews indicate the SEC’s active engagement in understanding and potentially integrating cryptocurrencies into regulated financial products.
BlackRock’s application to list a spot Bitcoin ETF on the Nasdaq was initially filed in June 2023. The discussion around Bitcoin ETFs has been fueled by a 2019 video of SEC Chair Gary Gensler, where he criticized the commission’s “inconsistent” approach to Bitcoin products. The approval of a spot Bitcoin ETF by the SEC would be a landmark decision, potentially paving the way for wider acceptance and integration of cryptocurrencies in the mainstream financial sector.