According to a public document, investment management giant BlackRock submitted an application for a spot Bitcoin ETF to the US Securities and Exchange Commission (SEC) on June 15th New York time.
This move comes as the crypto industry is embroiled in a regulatory battle with the SEC over alleged violations of securities laws, with the top exchanges Coinbase and Binance being sued by the SEC earlier this month.
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As of March 2023, BlackRock manages $9.1 trillion in assets, and the company outlined plans for its iShares Bitcoin Trust, which will commission Coinbase Custody as the Bitcoin custodian and BNY Mellon will serve as the cash custodian, using Bitcoin reference rates from CF Benchmarks, a subsidiary of Kraken, to consistently track spot pricing data collected from exchanges.
BlackRock previously partnered with Coinbase in August last year, allowing clients to hold and trade digital assets using BlackRock’s investment management platform, Aladdin, starting with Bitcoin. Through the deal, BlackRock clients can use Coinbase’s trading, custody, block trading and reporting services.
Prior to connecting with Coinbase, BlackRock launched the iShares and Blockchain Technology ETF (IBLC) in April 2022. Over a year after its debut, the assets under management by IBLC are only $7 million, despite the fund rising 75% so far this year.
Regulatory Hurdles
Registering a Bitcoin ETF in the US has long been a difficult task, especially for funds that deal in spot market transactions. So far, the SEC has yet to approve any applications for such spot ETFs, including those from Grayscale, VanEck and WisdomTree, citing concerns over potential fraud or manipulation in the spot market. 21Shares and Cathie Wood’s Ark Investment have also been trying to register spot Bitcoin ETFs since 2021.
In contrast, the agency has approved four Bitcoin futures ETFs. The largest of these is the ProShares Bitcoin Strategy ETF (BITO), which manages assets of about $800 million. According to FactSet, the fund has lost more than 40% since its launch. Bitcoin fell more than 60% since its all-time high shortly after BITO was launched.
Grayscale has already filed a lawsuit against the SEC for rejecting its bid to convert the Bitcoin Trust to a spot ETF, with a decision expected later this year. If ETFs begin trading, they typically take several months to launch after the initial application. Aisha Hunt, head of asset management law firm Kelley Hunt & Charles, is not optimistic about this and tweeted that BlackRock’s application could face strong resistance from the SEC and may ultimately be withdrawn.
Industry Impact
CF Benchmarks CEO Sui Chung said in a statement, “It is estimated that 20% of Americans at some point own Bitcoin. The proposed ETF by BlackRock may provide a more familiar and easier option for the other 80%.” BlackRock CEO Larry Fink has also expressed optimism about cryptocurrency over the past year, calling tokenized securities the “next generation of the market” at a New York Times summit in November. BlackRock’s application for a spot Bitcoin ETF may mark a turning point for the industry as prominent players in traditional finance recognize Bitcoin’s potential. If the SEC loosens its policies, these products may flood the market, providing investors with safer investment opportunities and opening the door to a new wave of cryptocurrency adoption through regulated and easy-to-use investment tools.
Author: BlockingBitpushNews Mary Liu
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