Amid regulatory pressure, asset management giant BlackRock submits application for physically-backed Bitcoin ETF

Author: BlockingBitpushNews Mary Liu

According to a public document, investment management giant BlackRock submitted a Bitcoin ETF application to the US Securities and Exchange Commission (SEC) on the afternoon of June 15 New York time.

This move comes as the encryption industry is embroiled in a regulatory battle with the US SEC for alleged violations of securities laws, earlier this month, the SEC sued top exchanges Coinbase and Binance.

As of March 2023, BlackRock manages $9.1 trillion in assets. The company outlined plans for its iShares Bitcoin Trust, which will commission Coinbase Custody as the Bitcoin custodian and Mellon Bank of New York as the cash custodian. The product in the plan will use Bitcoin reference rates from CF Benchmarks, a Kraken subsidiary that collects pricing data from exchanges to continuously track spot pricing.

BlackRock previously partnered with Coinbase in August last year to allow clients to hold and trade digital assets on BlackRock’s investment management platform Aladdin, starting with Bitcoin. Through the deal, BlackRock clients could use Coinbase’s trading, custody, bulk brokerage, and reporting services.

Prior to its association with Coinbase, BlackRock launched the iShares and blockchain technology ETF (IBLC) in April 2022. More than a year after its debut, the assets managed by IBLC were only $7 million, despite the fact that the fund has risen 75% so far this year.

Regulatory Resistance

Registering a Bitcoin ETF in the US has always been a difficult task, especially for funds dealing with spot market transactions. So far, the SEC has not approved any such spot ETF applications, including Grayscale, VanEck, and WisdomTree, due to concerns of 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 data, the fund has lost more than 40% since its launch. Bitcoin has fallen more than 60% since hitting a historic high shortly after BITO’s launch.

Grayscale has filed a lawsuit against the SEC for rejecting its bid to convert its Bitcoin Trust into a spot ETF. A decision on the case is expected later this year. If ETFs go ahead, they typically take several months to launch after an initial application. Aisha Hunt, head of asset management at law firm Kelley Hunt & Charles, is not optimistic, tweeting that BlackRock’s application is likely to face strong SEC resistance and may ultimately be withdrawn.

Industry impact

Sui Chung, CEO of CF Benchmarks, said in a statement: “An ETF proposed by BlackRock could offer a more familiar and easier-to-access choice for the other 80% of people who may have some exposure to Bitcoin at some point.” BlackRock CEO Larry Fink has also expressed enthusiasm for crypto over the past year, saying at a New York Times summit in November that tokenised securities are the “next generation” of the market.

BlackRock’s application for a spot Bitcoin ETF could mark a turning point for the industry as prominent players in traditional finance recognise the potential of Bitcoin. If the SEC relaxes its policies, these products could flood the market, offering investors the opportunity for safer exposure to Bitcoin via regulated and easy-to-use investment tools, opening the door for a new wave of crypto adoption.

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