In a significant development, BlackRock, the world’s largest asset manager, has officially filed an application to register a Bitcoin exchange-traded fund (ETF) with the United States Securities and Exchange Commission (SEC). The move comes after speculations fueled by a report from CoinDesk, which suggested an imminent filing.
BlackRock, boasting a massive $9.5 trillion in assets under management during the first quarter of 2023, is collaborating with Coinbase, the largest cryptocurrency exchange in the United States. The proposed ETF will utilize Coinbase Custody for its operations and rely on the exchange’s spot market data for pricing. Furthermore, BNY Mellon will serve as the cash custodian for the ETF.
This initiative builds upon a partnership forged between BlackRock and Coinbase in August of the previous year. The partnership aimed to enable BlackRock’s clients, utilizing the investment management platform Aladdin, to own and trade digital assets, beginning with Bitcoin. Through this collaboration, BlackRock’s clients gained access to Coinbase’s suite of services encompassing trading, custody, prime brokerage, and reporting.
Obtaining SEC approval for a Bitcoin ETF, particularly those dealing with spot market trading, has proven to be a challenging endeavor. To date, no application for a spot ETF has received approval from the SEC, primarily due to concerns regarding potential fraud and manipulation in the spot market. In contrast, the SEC has approved four Bitcoin ETFs for futures trading.
An ETF is a type of investment product that tracks commodities, currencies, stocks, or bonds. It offers investors exposure to a specific asset without necessitating direct ownership. In the case of a Bitcoin ETF, investors can invest in the world’s oldest and largest cryptocurrency without the need to hold it themselves. Instead, they can purchase shares that mirror the asset’s price movements.
The SEC’s reluctance to approve a Bitcoin spot market ETF has been a source of frustration for prospective applicants.