BlackRock Outsources BTC, Analysts Focus on January the 10th ETF Approvals

2024-01-03, 07:31

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![](https://gimg2.gateimg.com/image/article/1700024128RDZZ 1.jpeg)
BlackRock has agreed to use the cash creation model for its ETF.

The SEC is likely to approve several BTC ETFs in January 2024.

Over 7 spot <a href="/id/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ETF issuers have amended their filings to incorporate the cash creation model.

Keywords: Buy bitcoin, bitcoin ETF, ETF approval, sec to approve ETFs, regulatory concerns, BTC transactions, BlackRock ETF, BTC ETF
## Introduction
Crypto exchange traded funds enable individuals to access various crypto investment opportunities without any need to buy, own or sell cryptocurrencies. Although the United States has not yet [approved spot crypto ETFS](https://www.gate.io/learn/articles/how-to-continue-and-profit-in-the-ever-changing-cryptocurrency-market/966 "approved spot crypto ETFS") the market hopes it will do so in January 2024. Several spot bitcoin ETF applicants, including BlackRock are finalizing the preparations for the launch of the ETFs.

In this article, we discuss Blackrock’s preparation for the launch of its spot bitcoin ETF in the coming year. We will also assess the potential hurdles which spot BTC ETF applicants may face.

Read also: [SEC Postpones Decision on Spot Bitcoin ETFs from BlackRock and others](https://www.gate.io/blog_detail/3289/sec-postpones-decision-on-spot-bitcoin-etfs-from-blackrock-and-others "SEC Postpones Decision on Spot Bitcoin ETFs from BlackRock and others")
## Blackrock Nears Bitcoin ETF, Taps Prime Execution Agent for BTC Transactions
The spot Bitcoin exchange-traded fund (ETF) issuers, including Blackrock, are making their final preparations before they launch their ETFs, possibly in early January 2024. For example, Blackrock is set to appoint a third-party buyer and seller of bitcoin for its fund.

On 21 December 2023, [James Seyffart, a senior ETF analyst hinted](https://twitter.com/JSeyff/status/1737958464612184204 "James Seyffart, a senior ETF analyst hinted") that Blackrock has appointed a ‘Prime Execution Agent’, responsible for buying and selling bitcoin for its fund. Nonetheless, Seyffart said that “the SEC might not be comfortable with a Prime Execution Agent purchasing the Bitcoin in the cash model.”

It is a requirement that the bitcoin custodian or the prime execution agent allocates the corresponding BTC amount to the trust account before the company distributes the ETF shares. However, at the moment Blackrock has not named its prime execution agent.

When [it filed for the spot bitcoin ETF it named Coinbase as its custodian](https://www.gate.io/blog_detail/2879/%E7%AC%AC%E4%B8%80%E8%A1%8C%E6%83%85-sec%E6%80%81%E5%BA%A6%E9%9A%BE%E4%BB%A5%E6%8D%89%E6%91%B8-%E5%A4%A7%E7%9B%98%E8%B5%B0%E5%90%91%E4%BB%8D%E4%B8%8D%E6%98%8E%E6%9C%97-%E5%8A%A0%E6%81%AF%E9%A2%84%E6%9C%9F%E5%A2%9E%E5%A4%A7-%E4%BB%8D%E9%9C%80%E8%AD%A6%E6%83%95%E5%AE%8F%E8%A7%82%E9%9D%A2%E5%BD%B1%E5%93%8D "it filed for the spot bitcoin ETF it named Coinbase as its custodian"). The sad thing is that currently Coinbase is embroiled in a legal battle with the SEC for operating an unregistered securities exchange in the United States. During the year the SEC targeted several crypto exchanges [including Binance and Kraken](https://www.gate.io/learn/articles/after-one-year-of-the-merger-what-is-the-situation-of-ethereum/1052 "including Binance and Kraken").

Related news: [Grayscale Suggestion Prompts SEC's Re-evaluation of BTC ETF](https://www.gate.io/ru/blog_detail/3646/grayscale-suggestion-prompts-sec-s-re-evaluation-of-bitcoin-etfs "Grayscale Suggestion Prompts SEC's Re-evaluation of BTC ETF")

[Despite Blackrock’s recent move](https://www.gate.io/blog_detail/2841 "Despite Blackrock’s recent move"), it is not yet clear whether or not the SEC will approve a spot bitcoin ETF that uses an in-kind model where a prime execution agent will have a role to play.  Instead, the SEC is calling for a redemption technique called “cash create.” Let’s briefly discuss the two redemption methods. 
## In-kind vs. cash Create
Eric Balchunas, an ETF analyst, said that the SEC will likely approve spot bitcoin ETF applications where the issuer intends to use the cash create method. The SEC is unlikely to change its position.

Also, [Balchunas](https://twitter.com/EricBalchunas/status/1737952043392729204 "Balchunas") added that the SEC has discussed with the prospective spot bitcoin ETF issuers about the need to use the cash create method.

He wrote, “We heard it wasn't one giant conf call b/t SEC and every issuer but rather many calls to exchanges/issuers to reiterate that its Cash Creates or You Will Wait, which we knew already via chatter and the updated S-1s this week.”
![](https://gimg2.gateimg.com/image/article/17042669372.png)
Source: X.com

With the cash creation method, the authorized participant will deposit cash that is equivalent to the asset value of the units the issuer intends to create. The fund will use the cash to purchase the underlying asset, bitcoin.

This is different from the in-kind creation whereby the participant deposits bitcoin with an equivalent value to that of the units the ETF issuer intends to create. The advantage of the cash creation model is that it prevents the bid/ask spreads and the broker’s commission. For such a reason, the cash creation model is more efficient than the on-kind one.

Looking at the existing situation it seems that the spot bitcoin ETF issuers should amend their applications to encompass the cash creation method to enhance the [chance of the SEC approval](https://www.gate.io/blog_detail/3651/daily-news-the-sec-may-approve-bitcoin-spot-etfs-as-early-as-this-tuesday-zkbase-is-about-to-implement-a-1-1-token-swap-trb-silly-and-ordi-skyrocketing "chance of the SEC approval").

James Seyffart emphasised that point on X when [he said](https://twitter.com/JSeyff/status/1735079494002585844 "he said"), “I think everyone is gonna have to bend the knee to cash creates and redeems.” Already, there are spot bitcoin ETF applicants that have amended their filings to include the cash creation model.

Balchunas identified some of these issuers that include Invesco and Bitwise. Posting on X, he said, “Invesco is committing to cash creates only, as per their just-updated S-1. Pretty big clue that SEC is dug in on only letting cash create ETFs out in the first run . Still, many were waiting to see if BlackRock could sway SEC on in-kind.”
![](https://gimg2.gateimg.com/image/article/17042669993.png)
Source: X.com

In November, BlackRock had a meeting with the SEC to discuss its ETF share creation and redemption method. During the negotiations BlackRock presented its hybrid in-kind model to the regulator.

Also, during December representatives of the bitcoin ETF issuers like BlackRock, Grayscale and Fidelity met with the SEC to finalize their filings. Definitely, one of the key regulatory concerns for the SEC to approve ETFs has been the funding model.

Apart from Invesco and Bitwise, Galaxy has become one of the latest issuers to “bend its knees” to the demands of the SEC. The main reason why the SEC wants the cash creation method is to reduce the number of intermediaries in spot bitcoin ETFs.

The SEC set 29 December as the deadline for spot Bitcoin ETF applicants to submit their final S-1 amendments. In addition, each applicant should sign an agreement with an authorized participant (AP) and clarify on the cash-create redemption model it will adopt.

Read also: [An Overview of the Global Regulatory Landscape for virtual Assets](https://www.gate.io/learn/articles/an-overview-of-the-global-regulatory-landscape-for-virtual-assets/1043 "An Overview of the Global Regulatory Landscape for virtual Assets")

By 22 December 7 spot BTC applicants had agreed to use the cash creation model as the following table indicates.
![](https://gimg2.gateimg.com/image/article/17042670414.png)
Amended Spot BTC ETF Filings – Seyffart

As you note, most spot bitcoin ETF applicants have amended their filings in favour of the cash creation method. Also, the latest information shows that BlackRock has submitted its final spot bitcoin ETF application to the SEC where it has agreed to use the cash creation model.

Alessandro Ottaviani has confirmed BlackRock’s recent amendment. He posted, “New amendment from Blackrock, naming the AP (Authorized Parties).With this update: Blackrock has Cash Creation only as redemption method and has named the AP - 100% compliant with SEC guidance, positioning its request for the SEC approval.”
![](https://gimg2.gateimg.com/image/article/17042670725.png)
Source: X.com

### Analyst Optimistic: 90% Chance of ETF Approval despite Regulatory Hurdles

Despite many hurdles the crypto market is still optimistic that the bitcoin ETF approval will come in January 2024. The fact that the SEC has conducted many meetings with the BTC ETF issuers points towards a positive outcome.

Many investors are also anticipating the launch of BlackRock ETF in early 2024. As the year comes to an end, Balchunas still maintains that there is a 90% chance the SEC will approve BTC ETFs. Recently, [he maintained his position](https://twitter.com/EricBalchunas/status/1737958690769052055 "he maintained his position"), “Still holding at 90%, but it’s a very optimistic 90%.”
## How to Prepare for the Launch of Spot Bitcoin ETFs?
Many investors have started preparing for the launch of spot bitcoin ETFs. The first step is to <a href="/id/how-to-buy/bitcoin-btc" target="_blank" class="blog_inner_link">buy Bitcoin</a> and store it to benefit from its appreciation. The decrease in its supply will likely push its price up.

It is important to store bitcoin on secure exchanges or hardware wallets. Gate.io offers various BTC transactions like buying, holding and selling. 
## Conclusion 
BlackRock has made several changes to its spot bitcoin application to meet the demand of the SEC. As an example, it has agreed to use the cash creation model rather than its preferred in-kind model. Balchunas maintains that there is a 90% chance that the SEC will approve bitcoin ETFs in January 2024.  
## Bitcoin ETF FAQ
### How to prepare for a bitcoin ETF?
One way to prepare for a bitcoin ETF is to Buy bitcoin and hold it so that you benefit when its value appreciates. You should store your bitcoin in a secure wallet, especially cold wallets. You may also set aside funds to purchase shares of bitcoin ETFs.  
### What is BlackRock?
Blackrock is a United States based company that offers investment opportunities to retail and institutional investors. It recently applied for a spot bitcoin ETF in the United States.  
### What is cash create method of ETF?
With the cash create method the authorized participants (APs), such as broker-dealers and market makers, use cash to create or redeem units of an ETF. However, the Aps may also use the underlying assets to do the same depending on the terms of the ETF.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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