The SEC has met with Fidelity regarding a spot Bitcoin ETF to discuss physical creation and redemption mechanisms. Fidelity provided regulators with a presentation titled “Bitcoin ETF Workflow,” detailing slides on the “in-kind” creation and redemption model.
The presentation states: “With physical creation, arbitrage and hedging are more efficient, and self-clearing ETF market-making firms can serve as proxy APs for non-self-clearing ETF market-making firms with cryptocurrency affiliates, facilitating efficient arbitrage. Allowing physical creation and Redemptions are critical to improving transaction efficiency and secondary market pricing for all participants.”