Nasdaq Proposes In-Kind Redemption Model for BlackRock’s iShares Bitcoin ETF Amid Significant Inflows

• Nasdaq’s recent proposal to the SEC could revolutionize the Bitcoin ETF landscape, particularly for BlackRock’s iShares Bitcoin ETF (IBIT).

• This initiative aims to enhance operational efficiency by introducing an in-kind creation and redemption process exclusively for institutional participants.

• As IBIT experiences a $2 billion inflow over six days, the ETF solidifies its status as the leading spot Bitcoin offering in the U.S.

Nasdaq proposes an in-kind redemption model for BlackRock’s iShares Bitcoin ETF amidst a significant inflow surge, highlighting operational efficiencies.

BlackRock Bitcoin ETF Inflow Streak Aligns With Nasdaq’s In-Kind Push

The proposed in-kind process would simplify the ETF’s creation and redemption system, reducing the number of intermediaries involved. However, this feature would be exclusive to institutional participants, leaving retail investors out of the in-kind process.

If approved, the change would allow authorized participants (APs) to settle transactions in Bitcoin instead of converting the asset to cash. This method offers potential benefits, including tax efficiency, improved price alignment with Bitcoin’s market value, and a more streamlined process.

“BTC ETFs are about to be more efficient similar to European ETPs. Authorised Participants can now create and redeem directly with Bitcoin than only using cash,” crypto analyst Tom Wan stated.

BlackRock Bitcoin ETF In-Kind Redemption Model. Source: X/James Seyffart

James Seyffart, an ETF analyst at Bloomberg, highlighted this model’s operational efficiency. He noted that in-kind transfers involve fewer steps and parties compared to the cash-based process, which should make ETFs trade more smoothly. This efficiency could further enhance the appeal of Bitcoin ETFs to institutional investors.

“What it means is that ETFs should trade even more efficiently than they already do theoretically because things can be streamlined,” Seyffart said.

The request from Nasdaq reflects a growing demand for more flexible ETF structures. When spot Bitcoin ETFs first launched in January 2024, the SEC required issuers to use only a cash redemption model because the regulator “didn’t want brokers touching actual Bitcoin,” according to Seyffart.

However, as the market matures, calls for in-kind transfers have gained momentum, with proponents arguing that they better align with the decentralized nature of digital assets.

The filing coincides with a period of significant growth for IBIT. According to data from SoSoValue, the ETF has recently attracted over $2 billion in fresh inflows during a six-day streak.

BlackRock’s IBIT Flows. Source: SoSoValue

Since its debut, IBIT has accumulated $39.7 billion in inflows, cementing its position as the top-performing spot Bitcoin ETF in the U.S.

Conclusion

In summary, Nasdaq’s proposal to implement an in-kind creation and redemption process for BlackRock’s IBIT could significantly enhance operational efficiency for institutional participants while maintaining strong inflows. This initiative may well set a new standard for Bitcoin ETFs in the U.S., making them more aligned with the demands of institutional investors and the evolving nature of the crypto market.