On November 20, 2023, an important meeting was held between the U.S. Securities and Exchange Commission (SEC) and representatives of BlackRock, Inc. and Nasdaq Stock Market LLC. The main focus of the meeting was discussion of the iShares Bitcoin Trust and its potential listing on Nasdaq as a spot Bitcoin exchange-traded fund (ETF).
The SEC’s Trading and Markets Division hosted the meeting, which was attended by key figures 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, Eunah Choi, Jonathan Cayne, Giang Bui and Ali Doyle represented The NASDAQ Stock Market LLC.
BlackRock’s presentation to the SEC included a detailed description of two potential models for the iShares Bitcoin Trust: a “cash redemption model” and a “cash redemption model.” The model outlined the mechanisms of how an ETF could operate, focusing on the redemption process involving market makers, Bitcoin custodians, and various exchanges.
The spot redemption model involves a process where the ETF issuer instructs the Bitcoin custodian to issue Bitcoin to a market maker, who can then liquidate the Bitcoin position. This model involves multiple parties, including US-registered broker/dealers, spot cryptocurrency exchanges, and listed exchanges.
The cash-out model, on the other hand, involves the ETF issuer dealing with a market maker to sell Bitcoin for USD. This model involves additional steps involving a Bitcoin custodian taking cash out of cold storage and a market maker delivering the shares to a transfer agent through an authorized participant.
The SEC’s reaction to BlackRock’s announcement and proposed model is unclear, and there is no information on whether the SEC plans to approve the listing of a spot Bitcoin ETF. The approval of these ETFs would be an important milestone in the acceptance of cryptocurrencies in mainstream financial markets.
The meeting comes amid the SEC’s ongoing review of various proposals for spot crypto ETFs from several companies, including Fidelity. wisdom tree, Invesco Galaxy, Valkyrie, VanEck, and Bitwise along with BlackRock. The push for a spot Bitcoin ETF has been met with multiple delays and rejections, creating excitement and uncertainty in cryptocurrency and financial markets.
The SEC also met with Grayscale management the same day to discuss its proposal for a Bitcoin ETF. The meeting and ongoing review with BlackRock indicates the SEC is actively engaged in understanding and potentially incorporating cryptocurrencies into regulated financial products.
BlackRock’s application to list its spot Bitcoin ETF on Nasdaq was first submitted in June 2023. The discussion about Bitcoin ETFs was sparked by a 2019 video by SEC Chairman Gary Gensler, in which he criticized the commission’s “inconsistent” approach to Bitcoin products. The SEC’s approval of a spot Bitcoin ETF would be a landmark decision, potentially paving the way for broader acceptance and integration of cryptocurrencies in the mainstream financial sector.
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