Asset management behemoth BlackRock has taken the first step towards launching a spot Bitcoin exchange-traded fund (ETF). BlackRock’s application for the iShares Bitcoin Trust was filed with the U.S. Securities and Exchange Commission (SEC) this past Thursday. This opens up a path for investors to gain exposure to the world of cryptocurrencies. If everything goes fine, this would be huge for Bitcoin’s mainstream adoption.
This news has long been the subject of speculation, marking a turning point in the contentious relationship between crypto advocates and federal regulators. The proposed product, if approved, would be a means for investors to make a simplified investment in Bitcoin. This would sidestep the more complex process of acquiring, holding, and trading Bitcoin directly on a peer-to-peer basis. While using cryptocurrency exchanges is simple, according to the filing BlackRock will make it even more simple. This makes sense considering the fire cryptocurrency exchanges have been under from the SEC.
However, the SEC has historically resisted the launch of a spot Bitcoin ETF in the U.S. It’s currently engaged in a legal dispute with Grayscale over the potential conversion of its Grayscale Bitcoin Trust into an ETF. The decision on this case is expected later in the year and could set a precedent for BlackRock’s application. Several firms have previously filed and subsequently withdrawn applications for spot Bitcoin funds. This has created a sense of uncertainty around the eventual acceptance of such “assets.”
BlackRock Allegedly Asked For Faster ETF Approval
Typically, ETFs take several months to launch post-initial filing, assuming they commence trading at all. Experts, including Aisha Hunt, principal at asset management law firm Kelley Hunt & Charles, suggest that the proposed BlackRock fund could face significant resistance from the SEC. This could lead to the withdrawal of the filing before an ETF is launched.
This development emerges when crypto prices are considerably below their all-time highs and the industry is facing mounting scrutiny in Washington, D.C. The SEC recently accused both Coinbase and Binance of operating unregistered securities exchanges. Notably, Coinbase is listed as the Bitcoin custodian for the proposed BlackRock ETF, extending their existing strategic partnership.
Last year, the two companies announced that BlackRock’s institutional investment platform, Aladdin, would be linked to Coinbase Prime for crypto trading and custody. The implications of the recent accusations on the partnership, however, are yet to be fully explored.
BlackRock’s swing into the Bitcoin ETF space could act as a catalyst in a sector that has experienced instability over the past couple of years. Bitcoin futures ETFs first launched in 2021, with the ProShares Bitcoin Strategy ETF (BITO) being the only one to reach a substantial size, boasting about $800 million in assets. Since its launch, the fund has seen a decline of more than 40% on a total return basis. Concurrently, Bitcoin prices have dropped more than 60% since peaking shortly after BITO’s launch.
BlackRock’s move could provide the impetus needed for wider acceptance and integration of cryptocurrencies into mainstream financial systems. However, as the SEC mulls over the proposed ETF, all eyes will be on the unfolding dynamics in this space.
BlackRock’s Decision Initiated A Ripple Effect
BlackRock’s decision to dip its toes in the cryptocurrency world echoes the growing interest in cryptocurrencies within the traditional finance sector. As the largest asset manager globally, BlackRock’s engagement in the Bitcoin ETF sector is a significant milestone and signals a potential influx of traditional investors into the crypto markets.
The iShares Bitcoin Trust, if approved, promises to provide a simplified way for investors to gain exposure to Bitcoin, a highly volatile asset. Doing so alleviates the need for investors to engage directly with digital wallets or blockchain technology, hurdles that have so far been significant barriers to entry for many.
Coinbase’s involvement as the Bitcoin custodian adds another dimension of interest. Coinbase, one of the leading cryptocurrency exchanges in the U.S., has been navigating choppy regulatory waters recently. Accused by the SEC of running unregistered securities exchanges, the firm’s role in the proposed ETF is a crucial aspect to watch. It is a reflection of the intertwining relationship between cryptocurrency exchanges and traditional finance firms.