Nasdaq Files for In-Kind Redemptions for BlackRock’s Bitcoin ETF

Highlights:

• Nasdaq’s amended rule proposal allows in-kind Bitcoin redemptions for BlackRock’s iShares ETF.
• Experts, including Seyffart, praise Nasdaq’s proposal for improving ETF trading efficiency and liquidity.
• BlackRock continues to dominate the Bitcoin ETF market with impressive inflows and strong performance.

Nasdaq has submitted an amended rule proposal to allow in-kind redemptions for BlackRock’s iShares Bitcoin ETF (IBIT), per a Jan. 24 filing with the United States Securities and Exchange Commission (SEC). If approved, this rule change will allow authorized participants to redeem proceeds in BTC instead of cash.

The new filing reads:

“The Exchange now proposes to amend representations regarding the Trust’s creation and redemption process as set forth in the previous rule filing to list and trade Shares, specifically to allow for in-kind transfers of the Trust’s bitcoin.” 

When the SEC approved spot Bitcoin ETFs like IBIT last January, it permitted funds to launch using cash redemption rather than Bitcoin.

Experts Praise Nasdaq’s Proposal for BlackRock’s ETF

Bloomberg analyst James Seyffart and other experts have praised Nasdaq’s proposal for BlackRock’s ETF. Seyffart noted that this change could make ETFs trade more efficiently by streamlining processes. He said such an approach should have been permitted initially but faced opposition from Democratic SEC commissioners.

NEW: BlackRock/iShares just filed to allow in-kind creation and redemption on their Bitcoin ETF $IBIT pic.twitter.com/Hy0tIEK81h

— James Seyffart (@JSeyff) January 24, 2025

Chris J. Terry, chief architect at Bitseeker Consulting, clarified on Jan. 24 in a post on X that many mistakenly believe individuals can now deposit or redeem Bitcoin. He explained that this change primarily benefits Authorized Participants, ensuring ETF liquidity. 

Terry highlighted that in-kind redemptions are crucial for the tax efficiency of ETFs. He explained, “By allowing the exchange of shares for underlying assets, ETFs can minimize capital gains distributions, which can be a benefit for investors holding shares in the fund.”

BlackRock Leads the Bitcoin ETF Market

The asset manager is the largest Bitcoin ETF issuer globally, with IBIT holdings exceeding $60 billion. IBIT surpassed the $50 billion mark for the first time in December, a remarkable achievement within just one year.

BlackRock has continued to impress the market, registering three straight days of inflows. According to Farside Investors, the inflows totaled $661.9 million on January 21, $344.3 million on January 22, and $154.6 million on January 23. IBIT’s strong performance carried over into January 24, with market data showing over $2 billion in trading volumes within the first few hours.

Trump’s Crypto Commitment and Nasdaq’s Strategic Move for IBIT

During his campaign, Donald Trump promised policies to support cryptocurrency growth. On November 5, he defeated Kamala Harris and won the presidency with a strong majority. After his inauguration, he formed a crypto task force and repealed SAB 121, which restricted banks from offering crypto custody services.

In conclusion, Nasdaq’s plan to update BlackRock’s Bitcoin ETF represents a crucial move toward adapting the ETF market to changing crypto regulations. It simplifies the redemption process and supports in-kind BTC redemptions. This could help integrate Bitcoin into institutional finance and benefit investors.