BlackRock Rolls the Dice on a Bitcoin ETF
BlackRock’s BLK application registering a Bitcoin ETF on the commercial market looks like both a self-fulfilling strategy and an attempt to gain approval for an investment format that has been repeatedly rejected by U.S. regulators.
The world’s largest money manager, with $9.1 billion in first-quarter assets under administration, filed a preliminary prospectus for iShares BitcoinBTC Belief late Thursday afternoon New York time. The exchange-traded fund (ETF) is intended to hold bitcoins that will be held by Coinbase, the largest U.S. cryptocurrency exchange.
The Securities and Exchange Commission has insisted that commercial bitcoin is not safe enough to offer to retail investors, although funds based on bitcoin futures are allowed. In denying an application by VanEck to offer a Bitcoin ETF in March, the agency said the Cboe division that applied to offer the fund had failed to meet requirements that it be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest” because the underlying commercial bitcoin market is too opaque.
The SEC’s continued opposition to detecting Bitcoin ETFs raises the question of why BlackRock would go to the trouble of filing a prospectus for a fund that was destined to be denied. The answer may be that its name, size, and traditional financial background would go along the way towards overcoming the agency’s opposition to an inescapable development.
Some Perspectives
Jeff Feng, co-founder of SEI Labs and former Goldman Sachs analyst said that “as the world’s largest asset manager, BlackRock sees an opportunity to maintain its position in the global capital markets through its ETF application, if they are successful, it indicates a strong sense of confidence in their leadership by the SEC to navigate the challenges of a revolutionary product alongside regulators while legitimizing Bitcoin.”
Feng, whose firm backs the SEI blockchain, designed for trading digital assets, says legitimacy could extend to other cryptocurrencies. “Given BlackRock’s shift in its position on bitcoin in recent years, it’s clear they don’t see bitcoin and tokenization as something that can be ignored as a globally traded asset.”
Larry Fink, BlackRock’s CEO, called bitcoin a “money laundering index” in 2017 but has since moderated that view. In August, BlackRock announced it would offer bitcoin trading to some institutional clients in a deal that also involves Coinbase.
A BlackRock spokeswoman confirmed the filing of the registration statement, but declined to comment further due to “regulatory filing restrictions.”
The ETF filing comes as the SEC has been cracking down on the cryptocurrency industry. Last week, it sued Binance, the world’s largest cryptocurrency exchange, as well as Coinbase, alleging they were operating as unlicensed exchanges that listed unregistered securities; a category which keeps up including most cryptocurrencies.
Grayscale, from Electronic Currencies Group, is suing the SEC over its refusal to allow the fund management firm to convert a bitcoin trust into an ETF in a case that began in June last year. Grayscale argues that the SEC’s position that commercial prices are subject to manipulation, but futures are not, is illogical, as the latter reflects the former.
By Marina Meza
