The world's largest asset manager, BlackRock, has filed an application with the Securities and Exchange Commission (SEC) for the first bitcoin exchange-traded fund (ETF), which would provide investors with exposure to the cryptocurrency on a spot basis.
BlackRock, the financial giant with an impressive $9.5 trillion in assets under management (AuM), is teaming up with America's leading crypto exchange, Coinbase. Together, they plan to launch an ETF that utilizes Coinbase Custody for the secure storage of Bitcoin and relies on the exchange's spot market data. Additionally, BNY Mellon will be responsible for the custody of the cash holdings. The approval of BlackRock's Bitcoin ETF would be a significant milestone for the industry.
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The First US Spot Bitcoin ETF?
An ETF, or exchange-traded fund, is an investment fund traded on exchanges that aims to represent investors' exposure to a portfolio of assets such as stocks, bonds, or commodities. Generally, there are two types of ETFs. Futures-based ETFs track the performance of underlying assets through futures contracts, while spot-based ETFs track the price movements of assets based on their actual market prices. In the case of Bitcoin, futures-based funds have some drawbacks for investors, as explained by CVJ.CH in the coverage of the first Bitcoin ETF in the US.
Notably, the US Securities and Exchange Commission (SEC) has approved nine futures-based Bitcoin ETFs to date. However, the SEC has rejected over a dozen applications for spot-based ETFs, citing insufficient protection against market manipulation. This strategy has faced criticism from industry representatives as well as a US court. With BlackRock entering the race for the first spot Bitcoin ETF, a heavyweight in the financial sector is joining in. The $9.5 trillion asset manager is considered one of the most influential financial institutions globally and boasts over 400 launched ETFs.
Close collaboration with Coinbase
The selection of Coinbase Custody as the custodian for the BlackRock Bitcoin ETF comes as no surprise. The asset manager launched a private Bitcoin trust a year ago, providing institutional investors with exposure to the largest cryptocurrency, also in collaboration with the US crypto exchange Coinbase. Furthermore, since last August, BlackRock's renowned analytics system, Aladdin, has had access to crypto data from the exchange.
The filing of a Bitcoin ETF by BlackRock, a reputable and longstanding asset management company, can be seen as a promising step toward regulatory approval of digital assets. BlackRock confirmed a year ago that despite a sharp downturn, there is still significant interest among some institutional clients in gaining regulated access to the crypto markets.
