BlackRock and ARK Revise Bitcoin ETF Plans to Comply with SEC's Cash-Only Model

BlackRock and ARK Revise Bitcoin ETF Plans to Comply with SEC's Cash-Only Model
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Major applicants amend filings for Bitcoin ETFs

BlackRock and ARK Invest, two major applicants for a Bitcoin exchange-traded fund (ETF) in the United States, are making changes to their filings to comply with the cash redemption model required by securities regulators. The amendments to their S-1 registration statements with the U.S. Securities and Exchange Commission (SEC) relate to the cash creation and redemption model for proposed spot Bitcoin ETFs. Both BlackRock and ARK are accepting the cash redemption system instead of non-monetary payments like BTC.

ARK hints at cash-only model for its Bitcoin ETF

ARK's registration statement for its ARK 21Shares Bitcoin ETF suggests that it will only allow cash creations and redemptions. The document mentions the possibility of in-kind transactions subject to regulatory approval. BlackRock filed a similar update, stating that in-kind transactions may take place but only with regulatory approval. According to Bloomberg ETF analyst Eric Balchunas, this indicates that ARK and its ETF partner 21Shares ultimately decided to comply with the SEC's cash-only requirement.

SEC's "cash-only" requirement explained

The SEC's requirement means that authorized participants (AP) can only obtain more shares of the ETF by bringing cash to the table. This differs from in-kind creations, where the AP brings the asset that the ETF tracks and exchanges it for shares. Investor and consultant Vance Harwood explains that the SEC's position is understandable as it ensures transparency in determining the source of the underlying Bitcoin for the ETF.

WisdomTree keeps in-kind option

Global ETF provider WisdomTree also filed for an S-1 amendment for its spot Bitcoin ETF, the WisdomTree Bitcoin ETF. Unlike BlackRock and ARK, WisdomTree is keeping the in-kind creation and redemption option for its ETF.

Finance lawyer Scott Johnsson predicted in mid-December that ETF applicants would ultimately have to adopt the cash creation and redemption model. Other applicants, including Invesco and Galaxy, have also updated their registration statements to comply with the cash-only model.