Asset management giant BlackRock made an ambitious move last week to launch a publicly traded spot bitcoin exchange-traded fund, which has long been a point of discord between federal regulators and between crypto market advocates and federal regulators.
The firm filed an application with the U.S. Securities and Exchange Commission (SEC) seeking permission to launch the iShares Bitcoin Trust. BlackRock is working together with the largest US cryptocurrency exchange Coinbase (COIN) and is planning to use Coinbase as its ETF custodian. According to the prospectus, trust will be listed on the Nasdaq exchange and pricing will be calculated daily based on the CF CME Bitcoin Reference Rate, which “aggregates the notional value of Bitcoin trading across major Bitcoin spot exchange.”
BlackRock, which has over $9 trillion in assets under management (AUM) already operates a spot bitcoin private trust for institutional clients, which it launched in partnership with Coinbase in August last year. The two firms created new access points for institutional crypto adoption through the connection of their Coinbase Prime and Aladdin platforms.
SEC has so far approved only Bitcoin futures ETFs, which were first launched in 2021. However, the ProShares Bitcoin Strategy ETF (BITO) is the only one that has grown to a substantial size of $800 million in assets. The fund has lost more than 40% on a total return basis since the launch, according to FactSet.
It is still unclear whether the SEC will approve BlackRock’s application. Earlier this month, the regulator sued Coinbase alleging securities violations – as well as previous rejections for similar filings from other asset managers such as Grayscale, Fidelity, and Cboe Global Markets.
"The fact that BlackRock, a well-respected and established asset management company, has filed for a Bitcoin ETF could be seen as a positive development in the quest for regulatory approval," Joshua Chu, group chief risk officer at blockchain technology group XBE, Coinllectibles and Marvion said to Reuters. "It also shows the resilience of the public's interest in crypto," he added.
If the application is approved the launch of a publicly traded spot bitcoin ETF could help rebuild confidence in digital assets, which has been crippled by the collapse of FTX last year and other alleged violations of securities laws by crypto market players. In addition, it would be a significant game changer for crypto markets, as the ETF would allow easy access for investors to get exposure to crypto in a product from one of Wall Street’s largest companies.