BlackRock's Bitcoin ETF (IBIT) Submits SEC Filing to Allow In-Kind Transfers of BTC, Simplifying the Process for Authorized Participants

In a filing submitted to the U.S. Securities and Exchange Commission, Nasdaq proposed on behalf of BlackRock to amend certain conditions made in the initial proposal for the iShares Bitcoin (BTC) Trust that would “allow for in-kind transfers of the Trust’s Bitcoin.”

Nasdaq has submitted a filing to the U.S. Securities and Exchange Commission (SEC) to simplify the process for authorized participants to exchange Bitcoin ETF shares for underlying assets, such as Bitcoin. This move is expected to enhance the efficiency of ETF trading and benefit investors.

Nasdaq, on behalf of BlackRock, has proposed an amendment to certain conditions in the initial proposal for the iShares Bitcoin (BTC) Trust (NYSE:IBIT) to "allow for in-kind transfers of the Trust's Bitcoin."

According to the filing, the proposed in-kind transfer process will serve as an alternative to the Trust's current cash creation and redemption process.

"The Trust will be permitted to engage in in-kind creations and redemptions of the Trust's وحدات الاستثمار المتداولة in large-籃 كرة السلة وحدات الاستثمار المتداولة creations and redemptions, subject to the conditions set forth below," Nasdaq wrote in the document.

If the amendment is approved, then IBIT investors that fall under the category of Authorized Participants will be able to exchange ETF shares for underlying assets instead of cash. These underlying assets can also include Bitcoin among others. Authorized participants are typically large corporations, not individual shareholders. In-kind redemption helps to maintain the ETF's liquidity as it simplifies the process.

Bloomberg ETF analyst James Seyffart explained in a recent post that the process of trading ETFs will become more efficient because it is "way more streamlined with less steps and less parties involved." He also takes a jab at the SEC when it operated under Gary Gensler for enforcing on-cash redemptions due to regulatory preferences.

"In my opinion the ETFs should have been allowed to do this from the get-go but the Dem [Democratic] SEC commissioners were against it," Seyffart added.

While this change may not be particularly impactful for individual investors, it does stand to benefit IBIT's investors a great deal. Aside from liquidity, Bitseeker Consulting chief architect Chris J. Terry said that in-kind redemptions can play a major role in tax efficiency.

"In-kind redemptions can be used to minimize capital gains distributions from ETFs, which can benefit long-term investors," Terry noted.

As previously reported by crypto.news, BlackRock's IBIT ETF emerged on top out of the 12 Bitcoin ETFs with net inflows of $661.9 million on the first business day of Trump's presidency. However, it has experienced a slowdown in inflows throughout the past week.

On Jan. 22, BlackRock's IBIT added 6,470 BTC to its holdings, bringing the total to 563,134 BTC. BlackRock's IBIT Bitcoin holdings are currently valued at $55.6 billion, based on current market prices.