When the SEC requires cash redemptions, it hopes to minimize the number of intermediaries in spot Bitcoin ETFs to make them more controllable.

Eric Balchunas, a senior ETF analyst at Bloomberg, said in an interview that many ETF applicants have updated their registration documents with cash creation and redemption models. As of December 22, seven applicants' applications were fixed as cash creation, while the registration statements of the other seven applicants included both cash creation and physical modes. Most existing ETFs involve physical creation, which means that when intermediaries want to issue new ETF shares, they will provide funds to companies such as BlackRock using actual assets such as Bitcoin. This is how 90% of ETFs work with physical assets, while only 10% use cash.

ETF analysts believe that the US SEC wants cash-based Bitcoin ETFs because they want to minimize the number of intermediaries who can actually obtain Bitcoin in the redemption and issuance process. The US Securities and Exchange Commission hopes to "further close the loop" and reduce money laundering issues.