The SEC appears set on mandating cash redemption methods for spot Bitcoin ETFs instead of alternative "in-kind" approaches sought by some issuers, signaling applicants will likely need to acquiesce to its demands.

In updated filings this week, both Invesco and Galaxy pivoted to cash redemption models for their proposed Bitcoin funds rather than their previous in-kind mechanisms. The move follows apparent SEC insistence toward the structure.

Cash models lead to slightly wider spreads and tax inefficiencies but allow easier access. In-kind redemptions directly exchange Bitcoin baskets, avoiding conversion costs, but some see cash as providing flexibility edge. The SEC considers the cash approach more stringently protective.

Bloomberg's Eric Balchunas said the shift clues the SEC will only greenlight cash-based ETFs initially despite BlackRock attempting to pitch a hybrid model. With long-awaited approvals expected in January, applicants seem resigning to compliance — even if suboptimal.

Of course, nuances remain as negotiations advance behind closed doors. But directionally, firm regulatory guidance narrows wiggle room for product mechanics or launch timelines. As deadlines loom, Bitcoin ETF aspirants must play by set terms to ensure passage.