In a significant development for the cryptocurrency market, asset management giant BlackRock has taken the initial steps to launch a spot bitcoin exchange-traded fund (ETF).
The move has been a source of contention between crypto advocates and federal regulators.
BlackRock’s application to the U.S. Securities and Exchange Commission (SEC) for the iShares Bitcoin Trust aims to provide investors with convenient access to cryptocurrencies through a product offered by one of Wall Street’s largest companies.
BlackRock’s Application and Potential Impact
BlackRock filed an application with the SEC to launch the iShares Bitcoin Trust, which, if approved, would offer investors a simplified means of investing in bitcoin.
Unlike direct acquisition or peer-to-peer trading, the ETF would provide exposure to bitcoin without such complexities.
Further, the SEC has thus far resisted the launch of a Spot Bitcoin ETF in the United States. The ongoing legal battle between the SEC and Grayscale over the conversion of the Grayscale Bitcoin Trust into an ETF is expected to reach a decision later this year.
Several firms have previously filed and subsequently withdrawn applications for spot bitcoin funds. However, if the SEC’s stance relaxes, there may be an influx of similar products entering the market.
Potential Hurdles and Regulatory Environment Challenges
Launching an ETF typically involves a lengthy process following the initial filing, and the proposed BlackRock fund is likely to face substantial resistance from the SEC.
Aisha Hunt, principal at asset management law firm Kelley Hunt & Charles, suggests the possibility of retracting the filing before eventually launching the ETF.
BlackRock’s move comes at a time when cryptocurrency prices remain below their all-time highs, and the industry faces increasing regulatory scrutiny in Washington, D.C. Recent actions by the SEC include suing Coinbase and Binance for allegedly operating unregistered securities exchanges. Binance was also accused of commingling customer funds with its own.
Strategic Partnership and Potential Industry Boost
Coinbase, a leading cryptocurrency exchange, serves as the custodian for the proposed BlackRock ETF. BlackRock and Coinbase previously established a partnership that integrated BlackRock’s institutional investment platform, Aladdin, with Coinbase Prime for crypto trading and custody.
BlackRock’s entry into the bitcoin ETF space could provide a much-needed boost to a sector that has faced challenges over the past two years.
Bitcoin futures ETFs launched in 2021, with the ProShares Bitcoin Strategy ETF (BITO), emerging as the most substantial player, accumulating approximately $800 million in assets. However, BITO experienced over a 40% loss on a total return basis since its launch. Coinciding with a decline of more than 60% in the price of bitcoin since its peak.
BlackRock’s recent filing for a Spot Bitcoin ETF
BlackRock’s recent filing for a spot bitcoin ETF signifies a pivotal moment in the accessibility of cryptocurrencies.
The outcome of the application, along with the evolving regulatory landscape, will determine the future of the sector. If approved, the ETF would open doors for investors to easily participate in the crypto market, facilitated by one of Wall Street’s largest companies.