BlackRock Submits Revised Bitcoin Spot ETF Application, Addressing Market Manipulation

Jimmy Aki
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The world’s largest asset management firm, BlackRock, has submitted a revised version of its Bitcoin spot exchange-traded fund (ETF).

Prepay Model Added for Banking Accessibility

The $11 trillion-dollar asset manager, BlackRock, is expanding the scope of its crypto-focused initiatives in its latest Bitcoin spot ETF application.

According to the revised copy, BlackRock has introduced the option for users to purchase the crypto-backed investment vehicle using regular fiat rather than exclusively relying on cryptocurrencies.

The primary objective behind this move is to establish a viable access point for Wall Street banks to actively participate in the crypto-backed ETF investment tool. Additionally, BlackRock has unveiled a new in-kind redemption “prepay” model, allowing banks to serve as authorized participants in administering the fund.

This additional feature allows banks such as JPMorgan Chase and Goldman Sachs to hold Bitcoin or any other crypto asset on their balance sheets without attracting regulatory scrutiny.

To achieve this milestone, authorized participants (APs) must transfer cash to a broker-dealer, which converts the fiat deposit into Bitcoin. The digital funds are then securely stored with Coinbase Custody, the chosen custodial partner for the BlackRock spot Bitcoin ETF service.

Following the secure storage of assets, a representative amount of shares is released to the AP platform, reflecting their role in the process. A six-person team from BlackRock presented the revised model during a NASDAQ meeting on November 28.

The team highlighted potential benefits of the new in-kind redemption flow, including lower transaction costs, the transfer of execution risks to crypto market makers instead of investors, and the elimination of the need for issuers to finance or pre-fund sell trades.

However, the most crucial benefit highlighted is the “superior resistance to market manipulation” this new model offers investors. Market manipulation has been one of the chief reasons why the US Securities and Exchange Commission (SEC) has hesitated to approve a spot Bitcoin ETF in the North American nation for more than two years.

According to the Gary Gensler-led agency, the absence of proper measures and safeguards could end up harming investors in the long run.

BlackRock’s revised copy largely puts this reason to bed as it onboards several renowned financial institutions, ensuring the proper measures are put in place to avoid fraudulent activities.

Rounding up the list of benefits, BlackRock noted that this new model would largely offer simplicity and harmonization across the ecosystem.

Third Meeting Locked In as Approval Draws Closer

With its revised documentation now submitted to the SEC, BlackRock has arranged a third meeting with the leading securities regulator.

Bloomberg’s top ETF analyst, Eric Balchunas, shared this development on his X (formerly Twitter) handle, stating that the prevalent reason is to convince the SEC to approve in-kind creations in its first run of spot Bitcoin ETF approvals.

Besides BlackRock, fellow asset management firms like Grayscale, Fidelity, and Franklin Tempor had separate meetings with the SEC last week regarding their respective Bitcoin spot ETF filings. This update was shared by fellow Bloomberg ETF analyst James Seyffart.

Seyffart also pointed out that the Division of Trading & Markets and the Division of Corporate Finance were present in the round of meetings held with the aspirants.

Both divisions are expected to play a crucial role in determining whether a Bitcoin spot ETF would be approved.

A spot Bitcoin ETF approval is expected sometime between January 10 and 15, 2024, making the meetings even more important given the short timeframe.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.