Nasdaq has sent the SEC a plan to enhance IBIT’s redemption system by letting authorized participants exchange shares for physical Bitcoin supplies. Through its filing on BlackRock’s behalf, the company proposes to alter its Bitcoin spot ETF application rules to allow ETF share exchanges directly against Bitcoin holdings rather than for cash payments. The proposed change will offer a new option instead of cash transactions in ETF management.
Nasdaq’s application states that the in-kind asset exchange setup serves instead of cash-in-and-out operations at the Trust. The adjustment helps ETF performance while simplifying operations for institutional investors who hold authorized participant status. Organizations form the bulk of Authorized Participants because they make up the majority of participants in this system.
Wow. Way too many questions and this stuff goes pretty deep in the weeds. So i'll keep it high level and answer "What does this mean?"
Not all that much for individual retail investors. Mostly what it means is that ETFs should trade even more efficiently than they already do… pic.twitter.com/LWYsKmo5sH
— James Seyffart (@JSeyff) January 24, 2025
In interviews, Bloomberg ETF analyst James Seyffart explained why the change would help ETF investors. ETF trading procedures will run smoother because they demand less effort and involve fewer participants according to Seyffart. Under SEC chair Gary Gensler’s leadership he enforced strict cash-only redemption rules because of his regulatory preferences according to Mason Brown.
Institutional Investors Gain With Proposed In-Kind Redemptions
According to Seyffar,t the ETFs should have been permitted this option earlier but Democratic SEC commissioners blocked it. The plan helps institutional investors gain better trading options and lower tax liability. According to Bitseeker Consulting’s Chris J. Terry, who serves as chief architect, in-kind redemptions help shareholders save on taxes and gain financial benefits.
During Trump’s first business day in office, the iShares Bitcoin Trust from BlackRock emerged as the top Bitcoin ETF among 12 options, with a net gathering of $661.9 million. However, the fund has experienced reduced investment now.
On January 22, BlackRock’s IBIT increased its Bitcoin holdings by 6,470 coins to reach 563,134 BTC, valued at $55.6 billion based on existing market rates. The population data highlights how institutions now play a bigger part in crypto market activity.
Nasdaq’s application before the SEC will shape how other cryptocurrency ETF applications are handled. The SEC’s support for this new transfer method would create market standards that all Bitcoin ETFs could apply to their operations.