The U.S. Securities and Exchange Commission has approved a rule change that would allow the Nasdaq International Securities Exchange to list and trade in iShares Bitcoin Trust (IBIT), BlackRock's widely traded exchange-traded fund.
The decision marks another step in the expansion of Bitcoin-related derivatives, providing investors with more tools to manage their exposure to the world's largest crypto.
Following regulatory approval for several Bitcoin-linked ETFs in the US, BlackRock has been seeking approval for such a listing since at least March this year.
The SEC approval follows a number of reforms proposed by the Nasdaq ISE, which seek to address market manipulation and excessive risk in the emerging crypto options market.
It follows a number of calls for reform in the US to list bitcoin and ethereum ETF-linked options, which have faced opposition over threats to market stability.
A key amendment would put place and exercise limits on options on IBIT at 25,000 contracts — described as “extremely conservative” in terms of market size and trust funding, SEC filings show.
Options on IBIT are physically adjusted and feature US-style exercise, providing a hedge for investors looking to manage risks associated with Bitcoin.
BlackRock's ETF, which tracks the price of Bitcoin, has attracted a lot of attention from retail and institutional investors since its launch earlier this year, becoming one of the most liquid Bitcoin-related products in the US market.
Although welcomed, the SEC's action comes amid ongoing concerns about potential risks associated with cryptocurrency derivatives.
Comment letters submitted during the review process highlighted concerns over market volatility and the integration of crypto into traditional financial markets. Some have urged the SEC to delay approval until the Bitcoin market is more stable.
In any event, the SEC determined that the exchange's monitoring mechanisms, including real-time monitoring and monitoring-sharing agreements with CME, would be sufficient to prevent fraud.
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