Will BlackRock’s revision of the Bitcoin ETF for spot contracts change the game on Wall Street?

Could BlackRock's update to Bitcoin ETF, focusing on spot contracts, disrupt Wall Street?

Author: Brayden Lindrea, CoinTelegraph; Translation: Song Xue, LianGuai

A new physical redemption “prepayment” model will allow banking giants like JPMorgan Chase or Goldman Sachs to act as authorized participants in the fund, enabling them to bypass restrictions on holding Bitcoin or cryptocurrencies directly on their balance sheets.

Six members of BlackRock and three members of Nasdaq proposed this new model at a meeting with the U.S. Securities and Exchange Commission on November 28.

If approved, this could change the game for Wall Street banks seeking to participate in the trillions of dollars worth of assets on their balance sheets, as many regulated banks themselves are unable to hold Bitcoin.

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Under the revised model, Authorized Participants (APs) transfer cash to broker-dealers, who then convert the cash into Bitcoin, which is then stored by the ETF’s custodian (in the case of BlackRock, Coinbase Custody).

The new structure also shifts the risk away from the participants and onto market makers.

On November 28, BlackRock submitted the revised physical redemption model to the SEC. Source: SEC

BlackRock stated that the new model also provides “excellent resistance to market manipulation,” which has been a major reason for the SEC’s repeated rejections of previous physically-backed Bitcoin ETF applications.

In addition, BlackRock claims that the new ETF structure will enhance investor protection, reduce transaction costs, and improve the “simplicity and coherence” of the broader Bitcoin ETF ecosystem.

BlackRock’s Third Meeting with the SEC

Recently, according to a document recently filed by the U.S. Securities and Exchange Commission (SEC), BlackRock held its third meeting with the U.S. Securities and Exchange Commission (SEC) led by Gary Gensler on December 11.

The second meeting between BlackRock, Nasdaq, and the SEC on November 28 was a follow-up action to their initial meeting with the securities regulator on November 20, when BlackRock and Nasdaq proposed their initial physical redemption model.

The SEC must make a decision on BlackRock’s application by January 15, with a final deadline of March 15.

Meanwhile, ETF analysts predict that the SEC will make decisions on several pending physically-backed Bitcoin ETF applications between January 5th and 10th.

Grayscale, Bitwise, VanEck, WisdomTree, Invesco Galaxy, Fidelity, and Hashdex, among other financial companies, are also waiting for the SEC’s decision during these dates.

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