Nasdaq Seeks Rule Change to Allow In-Kind Creation for BlackRock’s Bitcoin ETF

Nasdaq Files for In-Kind Redemption of Bitcoin in BlackRock’s ETF: What You Need to Know

Nasdaq has officially filed a proposal on behalf of BlackRock, requesting a change in rules to allow in-kind creation and redemption for its iShares Bitcoin Trust (IBIT), a spot Bitcoin exchange-traded fund (ETF). This move comes after the launch of IBIT and ten other spot Bitcoin ETFs in January 2024, with BlackRock seeking to improve the efficiency and transparency of its fund.

In-Kind Transfers for Authorized Participants

The filing, submitted on January 24, 2025, to the US Securities and Exchange Commission (SEC), aims to allow Authorized Participants (APs)—institutions that facilitate the creation and redemption of ETF shares—to use Bitcoin or cash for transactions. This approach provides an efficient mechanism for the ETF, eliminating bid/ask spreads and broker commissions that typically arise from liquidating assets to raise cash for share issuance.

However, individual investors will not have direct access to in-kind transfers. As James Seyffart, an ETF analyst at Bloomberg, explained, the in-kind redemption model benefits only the institutions involved, ensuring more transparency and on-chain record keeping for fund movements.

Tax Efficiency and ETF Liquidity

This change will also contribute to the tax efficiency of the ETF, as it allows for the exchange of shares for underlying Bitcoin, minimizing capital gains distributions. Chris J. Terry, chief architect at Bitseeker Consulting, pointed out that in-kind redemptions play a key role in helping maintain ETF liquidity while benefiting long-term investors.

IBIT’s Success and Market Impact

As of January 2024, the IBIT has already seen $39.57 billion in inflows, making it the largest spot Bitcoin ETF in the US. The success of this fund highlights the growing interest in Bitcoin ETFs and the potential long-term impact on the cryptocurrency market.

In a related development, on the same day, CoinShares filed for a Litecoin (LTC) ETF and XRP (XRP) ETF, while Grayscale submitted filings to convert its Solana (SOL) and Litecoin (LTC) Trusts into ETFs.Nasdaq Seeks Rule Change to Allow In-Kind Creation for BlackRock’s Bitcoin ETF

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.