BlackRock disrupts the status quo, confronting the SEC with a groundbreaking application for a Bitcoin Spot ETF.
BlackRock, the world’s largest asset manager, has made a groundbreaking move by filing an application for a spot Bitcoin exchange-traded fund (ETF) with the United States Securities and Exchange Commission (SEC). The highly anticipated filing came on Thursday, following earlier reports suggesting that BlackRock’s entry into the Bitcoin ETF space was imminent.
With a staggering $9.5 trillion in assets under management during the first quarter of 2023, BlackRock is partnering with Coinbase, the largest cryptocurrency exchange in the United States, for this venture. The ETF will utilise Coinbase Custody for its operations, relying on the exchange’s spot market data for pricing, while BNY Mellon will serve as the cash custodian.
BlackRock And Coinbase Reunite: Collaborate For Bitcoin Spot ETF
This is not the first collaboration between BlackRock and Coinbase. Last August, the two companies established a partnership enabling clients using BlackRock’s investment management platform, Aladdin, to trade and hold digital assets, starting with Bitcoin. By means of this agreement, clients of BlackRock obtained the opportunity to utilize Coinbase’s trading, custody, prime brokerage, and reporting services.
Registering a Bitcoin ETF, particularly for spot market trading, has proven to be a challenging task. The SEC has yet to approve any application for a spot ETF due to concerns about potential fraud or manipulation in this market segment. On the other hand, the SEC has granted approval to four Bitcoin ETFs specifically designed for trading futures contracts.
An exchange-traded fund (ETF) is a financial product linked to diverse assets, including commodities, currencies, stocks, or bonds. It allows investors to gain exposure to an asset’s performance without physically owning it. In the case of a Bitcoin ETF, investors can invest in the world’s largest and oldest cryptocurrency without directly holding it; instead, they purchase shares that track its price movements.
The SEC’s reluctance to approve a Bitcoin spot market ETF has been a source of frustration for prospective applicants. Grayscale, an asset manager, submitted an application for a Bitcoin spot market ETF to the SEC in 2016, only to have it rejected in June 2022. This led Grayscale to respond with a lawsuit. In March, a federal judge cast doubts on the SEC’s claim that the data provided by Grayscale was insufficient for assessing the impact of fraud or manipulation in spot markets on futures markets.
BlackRock’s entry into the Bitcoin ETF arena with a spot trading focus marks a significant development. While the SEC’s stance on spot ETFs remains cautious, BlackRock’s application could pave the way for a breakthrough in this sector, offering investors a new avenue to gain exposure to the cryptocurrency market. The industry eagerly awaits the SEC’s response to BlackRock’s application and the potential implications it holds for the broader adoption of Bitcoin.