Bitcoin ETF: BlackRock’s Brave Bet or Bust?

BlackRock, the world’s largest asset manager, is venturing into the cryptocurrency space with its proposed iShares Bitcoin Trust. The company filed for a Bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC) on June 15, 2023. This move would provide investors with exposure to the high-stakes cryptocurrency, which has been under intense regulatory scrutiny in recent months.
The Goal: Simple Bitcoin Investments
The iShares Bitcoin Trust aims to provide an investment avenue that mimics the investment in Bitcoin. The ETF would simplify the process of investing in Bitcoin by removing the need for investors to directly buy, hold, and trade Bitcoin on a peer-to-peer basis or via a digital asset exchange. Instead, they could simply invest in the ETF, which would do all the legwork for them.
The Custodian: Coinbase
As part of the ETF arrangement, BlackRock would partner with Coinbase Custody as its custodian. This is part of a larger strategic partnership between BlackRock and Coinbase, which began last year with the connection of BlackRock’s institutional investment platform, Aladdin, to Coinbase Prime for crypto trading and custody.
The Challenge: Regulatory Hurdles
The road to launching the Bitcoin ETF isn’t without its challenges. The SEC has historically resisted the approval of spot Bitcoin ETFs in the U.S., and this proposed fund will likely face similar hurdles. The SEC is currently engaged in a legal battle with Grayscale over a similar issue, with a decision expected later in the year. Several other firms have previously filed and later withdrawn applications for spot Bitcoin funds.
BlackRock’s move comes at a time when the cryptocurrency industry is facing increased scrutiny in Washington, D.C., and when crypto prices remain well below their all-time highs. The SEC has recently sued Coinbase and Binance, accusing them of running unregistered securities exchanges, which further complicates the landscape.
The Context: BlackRock’s Crypto Ventures
BlackRock has had a complex relationship with cryptocurrencies. While the firm has shown interest in the space, including launching an ETF tracking a basket of 41 blockchain-related companies in 2022, it has not committed to a specific Bitcoin product before. Its CEO, Larry Fink, emphasized the potential of tokenization over Bitcoin in his annual letter to investors earlier in 2023.
The firm already has an equity fund related to crypto, the iShares Blockchain and Tech ETF (IBLC), which has amassed less than $10 million in assets more than a year after its launch.
The Impact: A Potential Boost
Despite the challenges, BlackRock’s entry into the Bitcoin ETF space could provide a boost to a sector that has had a rocky start over the past two years. Bitcoin futures ETFs first launched in 2021, but only the ProShares Bitcoin Strategy ETF (BITO) has grown to a substantial size, with about $800 million in assets. The price of Bitcoin hit an all-time high shortly after BITO launched and is down more than 60% since its peak.
However, leading ETF experts have expressed skepticism about BlackRock’s move, arguing that it would be uncharacteristic for the firm. Despite this, the potential for a BlackRock Bitcoin ETF could add considerable legitimacy and mainstream acceptance to the cryptocurrency, especially if it involves BlackRock holding actual Bitcoin.


 

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Maria Irene
Maria Irenehttp://ledgerlife.io/
Maria Irene is a multi-faceted journalist with a focus on various domains including Cryptocurrency, NFTs, Real Estate, Energy, and Macroeconomics. With over a year of experience, she has produced an array of video content, news stories, and in-depth analyses. Her journalistic endeavours also involve a detailed exploration of the Australia-India partnership, pinpointing avenues for mutual collaboration. In addition to her work in journalism, Maria crafts easily digestible financial content for a specialised platform, demystifying complex economic theories for the layperson. She holds a strong belief that journalism should go beyond mere reporting; it should instigate meaningful discussions and effect change by spotlighting vital global issues. Committed to enriching public discourse, Maria aims to keep her audience not just well-informed, but also actively engaged across various platforms, encouraging them to partake in crucial global conversations.

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