SEC Eyes BlackRock’s BTC ETF Shift, Delays SOL, LTC Funds

The U.S. Securities and Exchange Commission (SEC) has opened a public comment period for BlackRock’s proposed in-kind redemption model for its iShares Bitcoin Trust (IBIT), announced on May 13, 2025. On the same day, the SEC delayed its review of Grayscale’s proposals to convert its Solana and Litecoin Trusts into ETFs, extending the timeline to assess compliance with investor protection standards. The SEC also delayed the 21Shares Dogecoin ETF, filed to track DOGE via a CF Benchmarks index and trade on Nasdaq.

BlackRock’s In-Kind Redemption Proposal

BlackRock, the world’s largest asset manager, is seeking to amend the redemption mechanism for its iShares Bitcoin Trust (IBIT), which began trading in January 2024. Currently, the ETF operates under a cash redemption model, requiring the fund to sell Bitcoin and distribute cash to authorized participants (APs) redeeming shares. The proposed in-kind model would allow APs—typically large financial institutions—to receive Bitcoin directly, streamlining transactions and potentially reducing costs. The SEC’s May 13, 2025, filing signals a thorough review of the proposal’s implications. The agency stated, “Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change.”

Why In-Kind Redemptions Matter:

In-kind redemptions offer several advantages for Bitcoin ETFs:

• Efficiency: In-kind redemptions eliminate the need to sell Bitcoin on the market, reducing transaction fees and bid/ask spreads. Bloomberg ETF analyst James Seyffart has noted that this could make ETFs “trade more efficiently.”

• Market Stability: By avoiding forced Bitcoin sales, in-kind redemptions may reduce price volatility during large redemption events.

• Tax Benefits: In-kind transactions can minimize capital gains taxes for institutional investors, aligning Bitcoin ETFs with traditional commodity ETFs like those tracking gold.

The proposal, initially filed by Nasdaq in January 2025, has garnered attention for its potential to set a precedent for other Bitcoin ETFs. If approved, it could enhance the appeal of crypto ETFs to institutional investors, further bridging digital assets and mainstream finance. Notably, the proposed rule change does not allow individual investors to engage in in-kind creations and redemptions; only authorized participants can do so, according to Bloomberg ETF analyst James Seyffart.

Delays in Solana and Litecoin Trust Proposals

On the same day, the SEC delayed its review of Grayscale’s proposed Solana Trust and Litecoin Trust, extending the timeline to assess compliance with investor protection and market integrity standards. These trusts, if approved, would hold SOL and LTC, respectively, and trade on NYSE Arca, offering investors exposure to these altcoins through traditional brokerage accounts.

The SEC’s decision to postpone aligns with its ongoing efforts to clarify the regulatory status of altcoins through the Crypto Task Force’s series of roundtables. At the latest roundtable on tokenization, held May 12, 2025, newly appointed SEC Chair Paul Atkins outlined a three-part strategy focused on clear rules for crypto issuance, custody, and trading. Addressing altcoin regulation, Atkins stated, “I have asked staff to help us devise ways to modernize the ATS regulatory regime to better accommodate crypto assets, as well as explore whether further guidance or rulemaking may be helpful for enabling the listing and trading of crypto assets on national securities exchanges.” These delays reflect the SEC’s cautious approach as it evaluates whether altcoins like Solana and Litecoin constitute securities, a question central to the roundtable discussions, while working toward a comprehensive regulatory framework. The agency also delayed a decision on the 21Shares Dogecoin ETF, signaling a broader review of altcoin-based products.

Market and Community Reactions

The SEC’s solicitation of public comments on in-kind redemptions and its delayed review of altcoin ETFs remain within market expectations. As SEC Chair Paul Atkins indicated that the agency’s regulation of the crypto industry will shift to clear regulatory rules, the market is awaiting the implementation of these rules and anticipating less confrontational regulatory policies for altcoin ETFs, in-kind redemptions, and other products. Seyffart stated in an X post that he and fellow Bloomberg ETF analyst Eric Balchunas believe the SEC will approve in-kind redemptions within this year.

Due to the market’s prior anticipation of the SEC’s delays, these postponements have not significantly impacted the prices of related cryptocurrencies. Amid generally positive market sentiment, as of press time, BTC is trading at approximately $103,580, up 1.8% in the past 24 hours and 7.3% over the past week. SOL trades at $180, up 6.6% in 24 hours and 22% weekly, while LTC is at $103, up 2.7% daily and 12.8% weekly, according to Coingecko.