According to CoinDesk, a change in the mechanics of BlackRock's proposed spot bitcoin (BTC) ETF allows Wall Street banks, which face restrictions holding cryptocurrencies, to play a key role. BlackRock recently made it possible for authorized participants (APs) to create new fund shares with cash instead of only with cryptocurrency. This setup enables highly regulated U.S. banks, such as JPMorgan or Goldman Sachs, to act as APs to BlackRock's ETF, as they are unable to hold bitcoin themselves.
The cash APs use in this process can be exchanged into bitcoin by an intermediary and warehoused by the ETF's custody provider, according to a memo filing related to a Nov. 28 meeting involving the U.S. Securities and Exchange Commission, BlackRock, and Nasdaq. Optimism has grown that spot bitcoin ETFs will soon be approved by the SEC, which would be a game-changer for the digital assets industry if it attracts a flood of money from retail investors. The change means banks could get a cut of the action and broaden the ranks of liquidity providers. CF Benchmarks CEO Sui Chung said in an interview that if the SEC accepts this revised, dual model of create and redeem with cash and physical, the liquidity supporting the ETF shares when they trade would be increased, as more potential APs would be part of the process.
