The U.S. SEC has selected a cash creation and redemption mechanism to mitigate market manipulation risks surrounding a spot Bitcoin ETF.
The United States Securities and Exchange Commission has opted for a cash creation and redemption mechanism to address its concerns over market manipulation in the event it approves the launch of a spot Bitcoin (BTC) exchange-traded fund (ETF).
The use of cash creations means new shares of a spot Bitcoin ETF will be only created or redeemed through cash transactions, unlike traditional ETFs based on stocks and commodities, which typically use an in-kind model where market participants handle the underlying assets directly.
Initially proposed by Hashdex — one of the asset managers seeking regulatory approval for the investment vehicle — the mechanism was developed to prevent intraday price manipulation, according to Hashdex’s original filing from August.
