If a Bitcoin ETF is approved, BlackRock plans on making it easier for Wall Street banks to participate in it, as it intends to shift the risk to crypto market makers.
The Securities and Exchange Commission (SEC) shared a memo about a meeting in late November between the Commission, Nasdaq, and BlackRock.
The plan
According to the memo, the asset manager is planning on adding a novel way for redeeming the shares in the ETF.
Last month, the parties had a meeting to discuss feedback on the asset manager’s application for a Bitcoin ETF.
Thanks to a Bitcoin ETF, investors would be able to gain exposure to Bitcoin without having to purchase or store the asset directly.
For more than a decade, the SEC has been turning down Bitcoin ETF applications and most analysts believe its launch would see a huge influx of capital in the crypto markets.
However, the securities regulator has been reluctant to give the green light to such a product, believing that Bitcoin markets are vulnerable to manipulation.
The expectations
The world’s largest asset manager has submitted its application for the iShares Bitcoin Trust (IBTC), but the SEC has not decided against it as yet.
Technically, the regulatory agency has until January 15th to come to a decision, but analysts believe that it will issue a decision before then.
They expect the SEC to decide on several Bitcoin ETF applications earlier in January, between the 8th and 10th of the month.
The meeting between Nasdaq, the SEC, and BlackRock was a follow-up to the one that had happened back on November 20th.
In this meeting, the securities regulator shared some of the concerns it had about the redemption of shares BlackRock was planning on using.
The details
A T+1 settlement had been outlined in a previous proposal, which would start with IBTC shares delivered by a broker-dealer to a transfer agent.
The issuer would ask the custodian, which would be Coinbase Custody in this case, to transfer Bitcoin that backs the said shares to a crypto market maker.
The market maker would then be responsible for closing a short position on Bitcoin. T refers to the date of the order.
To put it simply, it would mean that the order would be settled on the same day it is made. As for a T+1 redemption, it means that an order placed on Monday would be settled the next day.
The world of traditional finance dictates that the days the market is open are the eligible days, which means that weekends are not included.
Thus, an order that would be placed on Friday would only be settled in the following week. New rules had been recently approved by the SEC for the T+1 settlement.
As per these rules, all ETF and stock settlement would happen within one business day. This change will be implemented from May 2024.
But, the new settlement flow would see crypto market makers initiate redemption orders with the broker-dealer getting cash to start the settlement before participants are involved.