- Nasdaq proposes in-kind redemption for IBIT, aiming to streamline operations and reduce transaction costs.
- BlackRock’s IBIT ETF reached a milestone, with $60B in holdings as of December 2024, just one year after its launch.
- As of January 2025, IBIT, the largest U.S. Bitcoin ETF, recorded over $1.1B in inflows in three days.
Nasdaq has submitted a formal application to the United States Securities and Exchange Commission (SEC) for BlackRock to implement an in-kind creation and redemption model for the iShares Bitcoin Trust (IBIT). The proposed model aims to enable participants who are eligible to redeem shares in Bitcoin rather than cash to increase the efficiency of the ETF.
Enhancing Efficiency with In-Kind Redemptions
The in-kind redemption model allows authorized participants to trade in shares to obtain Bitcoin without the need to sell other assets to get cash. This approach does not have broker charges and bid/ask spreads usually encountered in cash redemptions. According to Bloomberg ETF analyst James Seyffart, this model should help enhance the efficiency of Bitcoin ETFs and make the process easier for institutional investors.
However, this model will only be available for authorized participants, the institutions that create and redeem ETF shares. Individual investors will still employ the cash model, as the in-kind model is unsuitable for individual investors. According to market experts, this model will improve the functioning of ETFs, improve price tracking and minimize any inefficiencies in the fund’s trading.
BlackRock’s Dominance in the Bitcoin ETF Market
BlackRock’s IBIT has recorded great successes since its launch in January 2024. The ETF has attracted more than $60 billion of investment, making it the biggest Bitcoin ETF in the United States. A report from Farside Investors revealed that more than $1.1 billion had been pumped into the firm in the last three days of January 2025. Additionally, IBIT achieved more than $2 billion in trading volumes on January 24 to establish its market leadership.
This move comes when BlackRock is expanding its global operations, including launching a similar Bitcoin ETF on the CBOE Canada exchange. These advancements underscore BlackRock’s strategic focus on Bitcoin ETFs and its ability to set benchmarks for competitors. While the in-kind redemption proposal is specific to its Bitcoin ETF, the company has not filed similar requests for its Ethereum ETF product.
Effects on the Broader ETF Market
The firm’s effort to shift to an in-kind redemption model is anticipated to affect other asset managers. Similarly, other firms in the market may consider adopting similar models to build up their ETF strategies. On the same day of the Nasdaq filing, several crypto ETF applications from firms such as CoinShares and Grayscale were filed with the SEC. Grayscale’s filings include unique ETF ideas like the Bitcoin Adopters ETF and Ethereum Premium Income ETF.
The SEC’s decision regarding BlackRock’s proposal may pave the way for other ETFs. If the in-kind model gets approved, it will likely be widely adopted and can enhance cryptocurrency assets in traditional financial markets.
