Bitcoin ETF Reshaped: BlackRock and Grayscale Revised Proposals

By: Eva Baxter

In a bid to address regulatory concerns, BlackRock has revisited its spot Bitcoin ETF application to the SEC. The amendments, intended to offset worries around market manipulation and broker-dealer registrations, were discussed in a meeting on Nov. 28, 2023, between representatives of BlackRock and the SEC's Division of Trading and Markets.

As part of the revised proposal, BlackRock is implementing a 'prepaid model' that changes the present in-kind redemption model. The modification will provide a protective coating to brokers from risks related to Bitcoin transfers. The firm emphasized the viability of this structure, citing lower transaction costs, straightforward operations, and a reduced likelihood of manipulation.

Simultaneously, Grayscale is fine-tuning their Bitcoin ETF plans. The adjustments under consideration involve the fee structure, along with new custody arrangements for assets aiming at smoother share creation and redemptions.

The adjustments by these two financial giants highlight the ongoing quest for regulatory approval for a spot Bitcoin ETF, a process which has encountered several roadblocks due to the SEC's previously stated concerns. However, it remains uncertain if these proposed changes will be enough to alleviate the SEC's concerns about retail investors' spot Bitcoin exposure through an ETF.