Blackrock Prefers to Use In-Kind Creation Method for Spot Bitcoin ETF: Report

Blackrock, the world’s largest asset manager, has reportedly pushed for using the in-kind creation method for its bitcoin exchange-traded fund (ETF), diverging from the cash creation model favored by the U.S. Securities and Exchange Commission (SEC). According to reports, Blackrock and other spot bitcoin ETF applicants recently met to discuss their applications with the SEC.

Blackrock Prefers In-Kind Creation Model

The U.S. Securities and Exchange Commission (SEC) seemingly met with Blackrock, the world’s largest asset manager, to discuss the company’s application for a spot Bitcoin exchange-traded fund (ETF) this week, according to Bloomberg research analyst James Seyffart.

Noting that Grayscale Investments has engaged with the SEC regarding its bid to convert the firm’s bitcoin trust (GBTC) into a spot bitcoin ETF, the analyst shared insights on social media platform X on Wednesday, along with posting several slides from Blackrock. He wrote:

Looks like Blackrock also met with SEC! There’s a couple slides in relation to in-kind vs cash creation. Based on this it looks like Blackrock prefers in-kind for their bitcoin ETF (makes sense as its probably cleanest structure for them & end investors).

ETF units can be created in-kind or in cash. In cash creation, authorized participants provide cash to the ETF issuer in exchange for new ETF units.

Bloomberg senior ETF analyst Eric Balchunas also emphasized that Blackrock and Ark Invest are “standing firm on in-kind creates.” He explained that this method is better for investors in terms of spreads and tax, even though “word is that the SEC said you need to do cash creates (to avoid people using unregistered brokers) if you want to get out in the first batch.”

Last week, Balchunas shared on X that he has been “hearing chatter” that the SEC’s Division of Trading and Markets has engaged with exchanges, advising them to use the cash-create method for their spot bitcoin ETFs, instead of in-kind. The securities regulator also reportedly asked them to amend their spot bitcoin ETF filings in the next couple of weeks.

SEC Chair Gary Gensler recently revealed that the regulator is considering between eight and 10 spot bitcoin ETF applications. A number of people have predicted that the SEC will approve multiple spot bitcoin ETFs at once early next year, including the analysts at JPMorgan.

What do you think about Blackrock pushing to use the in-kind creation method for its spot bitcoin ETF instead of the cash creation method suggested by the SEC? Let us know in the comments section below.

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