BlackRock and the United States Securities and Exchange Commission (SEC) met this week to discuss potential changes in the ETP workflow, including the transition to digital asset funds for physical redemption.
On Monday, 1 April, closed meetings focused on the structure and operational mechanisms of the encrypted currency ETF with the newly established encryption working group of the SEC. It is understood that the Beled team explored in depth the potential for physical redemption, a model that the company has applied for in its spot bitcoin ETF.
In-kind redemption allows authorized participants to exchange their ETF shares directly for base assets, such as bitcoin, rather than cash, thereby increasing efficiency and reducing costs. The meeting showed that such redemptions may be gaining regulatory recognition.
This dialogue is particularly important with the continued growth of the Belet encrypted currency portfolio, with its IBIT funds holding more than 574,000 BTCs and ETFs holding more than 1.1 million ETHs. High-level representatives of the Beled team of regulators, products and ETFs participated in discussions on adjusting the existing ETP workflow to support the physical system.
Since January 2024, when the spot bitcoin ETF was approved, the SEC has been requesting a cash buy-back model on the grounds of hosting and compliance risks. NASDAQ stated in the Beled manual that such a structure would bring the encrypted currency ETF closer to the traditional commodity-based ETF.