This week, BlackRock and the US Securities and Exchange Commission (SEC) held a meeting to discuss changes to the workflows of crypto exchange-traded products (ETPs).
The meeting took place on April 1 and involved the SEC’s new Crypto Task Force. The main focus was on the structure and mechanics of crypto exchange-traded funds (ETFs).
BlackRock’s team explored the idea of in-kind redemptions. This model allows authorized participants to exchange ETF shares for the actual underlying asset, like Bitcoin, instead of cash. This method can enhance efficiency and lower costs. The discussion suggests that regulators may be open to this approach.
BlackRock’s involvement in the crypto market is significant. The firm holds over 574,000 Bitcoin in its IBIT fund and more than 1.1 million Ethereum in its Ether ETF. Senior members from BlackRock’s regulatory, product, and ETF teams took part in the discussions about modifying existing ETP workflows to accommodate in-kind systems.
Since the SEC approved spot Bitcoin ETFs in January 2024, it has required cash-only redemption models due to concerns about custody and compliance risks.
