BlackRock (NYSE: BLK), the $9-trillion money manager, is making waves in the cryptocurrency world as it pushes further into the realm of digital assets. In a groundbreaking move, the company has filed an application with the US Securities and Exchange Commission (SEC) to introduce a spot bitcoin exchange traded fund (ETF). If approved, this would mark the first publicly traded spot bitcoin ETF in the US, with the fund set to trade on the renowned Nasdaq stock market.
This strategic expansion builds upon BlackRock’s existing involvement in the crypto market, as it already operates a private spot bitcoin trust, launched last year. To safeguard the fund’s bitcoin holdings, BlackRock has chosen to partner with Coinbase Global (Nasdaq: COIN), a leading crypto exchange, which will act as the custodian.
The introduction of a spot bitcoin ETF by the world’s largest money manager could potentially breathe new life into the cryptocurrency market. This comes at a crucial time when the industry has faced its fair share of challenges, including the collapse of FTX and recent legal actions by the SEC against Coinbase and Binance for alleged securities violations.
In August 2022, BlackRock and Coinbase announced a partnership to widen the bridge between institutional investors and digital asset trading, providing BlackRock clients an avenue to manage their portfolio–traditional securities and digital assets alike–all within the firm’s investment management system Aladdin. The companies said the engagement “will initially be on bitcoin.”
However, the approval of BlackRock’s application remains uncertain. The SEC has previously rejected similar proposals from other asset managers due to concerns about unregulated exchanges and potential risks of surveillance and market manipulation.
Notably, the SEC is also facing legal action from Grayscale, a major crypto investment vehicle, over its refusal to convert into a listed ETF. The lawsuit argues that the SEC’s decision was arbitrary, especially considering the agency’s approval of ETFs based on bitcoin futures.
BlackRock’s move coincides with the SEC’s proposed new custody rules, aimed at imposing additional responsibilities on asset managers to ensure proper segregation of customer assets.
Despite bitcoin’s price decrease of over 60% from its 2021 peak, it has shown resilience since the FTX collapse last year.
“BlackRock’s increasing engagement shows Bitcoin continues to be an asset of interest for some of the world’s largest financial institutions.” With an estimated 20% of Americans having owned bitcoin at some point, BlackRock’s proposed ETF could provide the remaining 80% with a more familiar and accessible investment option,” said Sui Chung, CEO of CF Benchmarks, the provider of the bitcoin price BlackRock plans to use.
While BlackRock has declined to comment beyond the filing, founder Larry Fink expressed intrigue in the digital asset space in his annual letter to investors. During the company’s recent investor day, executives highlighted BlackRock’s ability to launch new ETFs and offer a diverse range of asset classes, boasting an impressive portfolio of over 1,300 different ETFs.
BlackRock’s decision comes amidst a period of increased scrutiny and regulatory actions in the cryptocurrency industry. The recent lawsuits filed by the SEC against Coinbase and Binance have created a challenging environment.
However, the market sentiment experienced a modest uplift with the filing of the ETF application by a traditional finance powerhouse. In response to this news, the price of bitcoin witnessed a slight increase, reaching a value close to $25,600.
Information for this briefing was found via the Financial Times and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.