SEC has initiated formal proceedings to reassess the operational structure of the BlackRock Bitcoin ETF, particularly focusing on a proposed rule change that could allow in-kind creation and redemption of ETF shares.
This move has drawn heightened attention across both traditional finance and the crypto sector, signaling a pivotal moment for the future of crypto-based investment vehicles.
SEC Opens Case on BlackRock Bitcoin ETF Shift
On May 13, the SEC opened proceedings under Section 19(b)(2)(B) of the Securities Exchange Act of 1934. This step stems from a proposal submitted by Nasdaq in January 2025, seeking permission for in-kind transactions involving the BlackRock Bitcoin ETF.
While the ETF has been actively trading since January 2024, the proposal represents a significant shift from the current cash-based redemption model.
Regulatory Spotlight on In-Kind Proposals
The rule change would enable the BlackRock Bitcoin ETF to process share creations and redemptions directly in Bitcoin. This model is seen by many in the industry as more suitable for cryptocurrency ETFs due to its operational efficiency and alignment with the decentralized nature of digital assets.
However, the SEC has not yet expressed a conclusive stance, instead opting for extended review and stakeholder input.
Timeline of the Filing
Nasdaq’s initial filing on January 24 was published in the Federal Register on February 12, triggering an initial review period. On March 11, the SEC extended its review deadline, ultimately deciding to begin a more comprehensive evaluation process.
Despite increasing market acceptance, the current proceedings reflect the Commission’s ongoing caution with crypto-related financial products.
Market Efficiency at the Core
Proponents of in-kind redemptions for the BlackRock Bitcoin ETF argue that allowing asset exchanges in Bitcoin eliminates inefficiencies linked to fiat conversion. This could reduce trading costs, increase liquidity, and provide better execution for large-scale investors.
If the proposal is approved, the BlackRock Bitcoin ETF stands to benefit from these advantages, potentially setting a precedent for future ETF designs.
The BlackRock Bitcoin ETF holds a central role in the broader discussion around crypto adoption in institutional portfolios. As one of the most recognized names in asset management, BlackRock’s approach carries weight in regulatory and investor circles.
By proposing an in-kind mechanism, the BlackRock Bitcoin ETF is pushing the boundaries of what regulators are willing to accommodate within traditional market structures.
Legal and Policy Barriers
Despite the potential benefits, the SEC remains focused on legal compliance, investor protection, and market integrity. The agency’s move to solicit public comments indicates lingering concerns around custody, fraud prevention, and fair trading mechanisms.
The BlackRock Bitcoin ETF must demonstrate that its revised structure can meet the regulatory standards set under the Exchange Act.
Competitive Landscape in Flux
While BlackRock seeks approval for its structural amendment, several other crypto ETFs face delays. The SEC recently postponed decisions on proposals involving Solana, Litecoin, and Dogecoin-based funds.
The BlackRock Bitcoin ETF, having already cleared initial approval in 2024, is uniquely positioned to lead the evolution of crypto ETFs if the current proposal advances.
Political Climate and Regulatory Tone
The SEC’s attitude toward crypto appears to be evolving under the current administration. Since early 2025, the agency has taken a more open approach to digital assets, including holding public roundtables and pausing enforcement actions against crypto firms.
This shift could increase the likelihood of the BlackRock Bitcoin ETF’s proposal being viewed favorably, especially given its emphasis on operational transparency and market stability.
Conclusion
The SEC’s proceedings mark a crucial juncture for the future of the BlackRock Bitcoin ETF and, by extension, the broader crypto ETF market. A decision on the in-kind redemption model could either validate a new standard or reinforce the agency’s cautious stance.
As the comment period progresses, the financial world will be watching closely to see if this flagship ETF can usher in a new era of crypto investment.
Frequently Asked Questions (FAQ)
1- What is the BlackRock Bitcoin ETF?
It’s a Bitcoin-based exchange-traded fund launched by BlackRock, currently traded on Nasdaq.
2- What is the proposed rule change about?
It aims to allow in-kind creation and redemption, enabling direct Bitcoin transactions instead of cash.
3- Why is the SEC reviewing this proposal?
The SEC needs to ensure the change complies with legal standards for investor protection and fair trading.
4- What is the benefit of in-kind creation?
It lowers costs, improves efficiency, and aligns better with crypto market operations.
Appendix: Glossary of Key Terms
BlackRock Bitcoin ETF – A Bitcoin-backed investment fund managed by BlackRock, offering exposure to Bitcoin via traditional markets.
In-Kind Redemption – A process allowing ETF shares to be created or redeemed using Bitcoin directly instead of cash.
SEC (Securities and Exchange Commission) – The U.S. regulatory body overseeing securities markets and ETF approvals.
Nasdaq Rule 5711(d) – A specific exchange rule that governs how commodity-based trust shares like crypto ETFs are listed and traded.
Section 19(b)(2)(B) – A clause in U.S. securities law allowing the SEC to extend its review and seek public input on proposed rule changes.
ETF Creation/Redemption – The mechanism by which ETF shares are issued or withdrawn, impacting liquidity and pricing.
Fiat Conversion – The exchange of cryptocurrency into government-issued currency, often used in cash-based ETF models.
References
News.Bitcoin – news.bitcoin.com
THE BLOCK – theblock.co
