Bitcoin spot ETF applicants are amending their filings to comply with the SEC’s new cash redemption model

BlackRock, WisdomTree, and Cathie Wood’s ARK have revised their Bitcoin spot ETF filings with the US Securities and Exchange Commission (SEC).

The three firms are the latest Bitcoin spot ETF applicants to revise their filings to ensure regulatory compliance with the regulator’s new cash redemption model.

BlackRock and ARK amended their filings

BlackRock, one of the world’s largest investment managers, and Cathie Wood’s ARK Invest recently updated their S-1 registration statements. The amendments were filed on December 18, relating to the cash creation and redemption model for the firms’ spot Bitcoin ETFs proposals.

BlackRock and ARK have decided to accept the cash redemption system instead of in-kind redemptions, implying non-monetary payments, such as Bitcoin.

In its registration statement, ARK hinted that its ARK 21Shares Bitcoin ETF would only allow redemptions and creations done with cash. The statement also referred to potential in-kind creation and redemption of shares, noting that the ETF might allow the creation and redemption of shares using in-kind transactions, assuming that participants are authorized and that there is regulatory approval.

Subsequently, BlackRock filed a similar statement with the regulator. Its filing says that in-ind transactions may take place under specific circumstances. Specifically, they must be subject to regulatory approval. The firm’s iShares Bitcoin Trust ETF S-1 amendment states that the transactions will occur in exchange for cash.

It also added:

The meaning behind the SEC’s cash-only requirement

The US SEC imposed a cash-only requirement, which means that authorized participants can only obtain more shares of any ETF by bringing the appropriate amount of cash to the table. The approach was described and explained by an investor and consultant, Vance Harwood, who said that some funds also allow in-kind creations. He noted that authorized participants must bring the asset that the ETF tracks and exchange it for the ETF shares.

Harwood also noted that the SEC does not seem to be keen on allowing this for Bitcoin spot ETFs, which is a position that he views as understandable. The analyst pointed out this will clarify where the ETF gets its underlying BTC from. In other words, the ETF must buy its BTC from reputable and regulated platforms.

On the other hand, if in-kind transfers were allowed, Bitcoin would be able to come from unknown sources, which increases risks.

WisdomTree opts to keep in-kind creations and redemptions

Apart from BlackRock and ARK Investments, WisdomTree also filed an amendment to its Bitcoin spot ETF, also on December 18. The company decided to keep the in-kind creation and redemption option.

Its registration statement said that Authorized participants, who act on the authority of the registered holder of shares, may surrender baskets in exchange for the appropriate amount of BTC or cash.