The spot Bitcoin exchange-traded fund (ETF) race is heating up, with issuers making tweaks to finalize the details of their products before the holiday period. BlackRock’s latest amendment will see a third-party buyer and seller of Bitcoin for its fund, but the Securities and Exchange Commission may not approve.
On December 21, senior ETF analyst James Seyffart reported that BlackRock has appointed a ‘Prime Execution Agent’ for its Bitcoin buying and selling.
BlackRock Finalizing Details
A ‘Prime Execution Agent’ is essentially a third-party broker that will buy and sell BTC on BlackRock’s behalf.
Seyffart noted that the “SEC might not be comfortable with a Prime Execution Agent purchasing the Bitcoin in the cash model.” He pondered which issuers would update their filings after this.
According to the BlackRock filing:
“No shares are issued unless the Bitcoin Custodian or Prime Execution Agent has allocated to the Trust’s account the corresponding amount of Bitcoin.”
BlackRock has not specified who the Prime Execution Agent would be. However, it named Coinbase as the custodian when it filed for the Bitcoin ETF in June.
Coinbase is currently embroiled in a regulatory battle with the SEC, which sued the firm for operating an unregistered securities exchange in early June.
Read more: How To Prepare for a Bitcoin ETF: A Step-by-Step Approach
Therefore, using Coinbase as the third-party broker is likely to ruffle feathers at the SEC. The agency has been actively targeting US crypto exchanges all year.
Fellow ETF analyst Eric Balchunas commented on the latest communications between the SEC and asset managers.
He noted that the regulator made many conference calls to exchanges and issuers this week to “reiterate that it is Cash Creates or You Will Wait.”
The SEC is pushing for the ‘cash create’ method of ETF share creation and redemption over ‘in-kind,’ which can use similar assets.
When asked about the odds of a January 10 approval, Balchunas replied:
“Still holding at 90%, but it’s a very optimistic 90%.”
Cash Create or In-Kind?
Seyffart posted a list of issuers that have amended their filings to cash creates and those that have both options.
He noted that Bitwise was the first to change to the cash-only model.
He also said that he remained confident of batch approvals in early January:
“All this is to say – we still think this is happening by Jan 10. Some issuers may be left behind. If anything this *may* bring approvals into 2023? But the base case I’m expecting approvals Jan 8-10.”