While US regulators are filing lawsuits against crypto platforms for alleged violations of securities laws, BlackRock, the world’s largest asset manager with over US$10 trillion under management, has filed to launch the first publicly traded spot Bitcoin exchange-traded fund (ETF) in the US.
After weeks of gloom and a huge governmental onslaught, the crypto market has received positive news. If BlackRock’s proposed Bitcoin ETF receives the go-light, it could completely transform the industry.
A game-changing Blackrock ETF
BlackRock, the largest US crypto exchange with $9.5 trillion in assets under management in the first quarter of 2023, is collaborating with Coinbase (COIN). The ETF will leverage Coinbase Custody and rely on spot market data from the exchange for pricing, with BNY Mellon as the cash custodian.
In August of last year, BlackRock and Coinbase announced a collaboration to allow customers of Aladdin, BlackRock’s investment management platform, to own and trade digital assets, starting with Bitcoin. Through the agreement, clients of BlackRock will have access to Coinbase’s trading, custody, prime brokerage, and reporting services.
Yesterday, BlackRock announced in a filing with the Securities and Exchange Commission (SEC) that it plans to launch the “iShares Bitcoin Trust,” with Bitcoin held in custody by Coinbase Custody Trust Co. If all goes well, the ETF will be traded on the Nasdaq.
Last week, the SEC filed a lawsuit against two of the largest crypto exchanges, Coinbase and Binance.US., accusing them of violating securities laws. The fact that an ETF would use a Coinbase subsidiary as its custodian raises questions about the product’s chances of being approved by the SEC.
On Thursday, Bloomberg senior ETF analyst Eric Balchunas tweeted that BlackRock’s filing was a “shocker.”
However, according to Balchunas “While the SEC has shown no indication that it will approve, BlackRock is very connected, so maybe they know something.”
Many investors consider the approval of a spot-traded Bitcoin ETF in the world’s largest economy and financial market as a stamp of approval for the digital currency. It would unlock considerable amounts of institutional investment in Bitcoin.
Some crypto market investors react hesitantly
However, some people in the crypto industry wanted to change what BlackRock did. They brought up “Operation Chokepoint” ideas, which say governments and traditional finance want to stop the crypto industry because it threatens their interests.
Will Clemente, the co-founder of digital asset research company Reflexivity Research, tweeted to his 683,700 followers on Thursday, stating if BlackRock’s spot ETF application gets approved, it is undeniable that Operation Chokepoint 2.0 was orchestrated to drive out crypto native companies and bring in large traditional firms that are buddy-buddy with the US [government] to try and control Bitcoin [and] crypto.
According to BlackRock’s SEC filing, The Shares are designed to provide investors with an easy alternative to buying, holding, and trading bitcoin on a peer-to-peer or other basis or through a digital asset exchange.
Grayscale, WisdomTree, and VanEck submitted applications to the SEC for spot Bitcoin ETFs, but the SEC ultimately denied all of them. After the SEC rejected Grayscale’s application in June 2022, the company filed a lawsuit, claiming the regulator has been inconsistent in treating other similar investment vehicles.
However, the securities authority has given the green light to a handful of Bitcoin futures-based exchange-traded funds.
Jeff Feng, the co-founder of Sei Labs, the startup behind the Sei trading blockchain, stated that traditional retail exchanges and brokers like Robinhood and eToro are “navigating complex terrain when venturing into crypto.”
According to Feng, a former Goldman Sachs analyst, “the absence of explicit regulatory guidelines has caused setbacks, leading to some tokens being delisted, resulting in crypto market volatility.” “Nevertheless, these growing pains are a natural part of the industry.”
Balchunas elaborated that among the risks to Bitcoin’s value listed in BlackRock’s petition are exchanges that “are largely unregulated and may be subject to manipulation,” which is the SEC’s main concern about authorizing an ETF.
