Investment firm BlackRock filed with the SEC two prospects for trading Bitcoin derivatives. Cash-settled futures do not entail handing over Bitcoin to investors.

BlackRock, Argentina’s leading private creditor, recently opened the door for Bitcoin derivatives to its product offering. The group classified this as an eligible investment for two of its funds. It is the first crypto initiative that the managing firm offers to its customers who seek to expose themselves to the pioneering cryptocurrency.

The investment firm filed with the US Securities and Exchange Commission (SEC) updated prospects to include Bitcoin futures. This implies the intention of adding Bitcoin derivative instruments in their investment funds. However, the application to the securities authority does not guarantee the availability of the product shortly.

Commodity exchanges registered with the Commodity and Futures Trading Commission (CFCT) will trade cash-settled Bitcoin derivatives. These will be available in BlackRock’s Global Allocation Fund and its Strategic Income Opportunities Portfolio. However, these derivatives do not require the delivery of the underlying asset (Bitcoin), but only exposure to changes in its price.

BlackRock’s Change of Perspective on Bitcoin

This company, which manages around USD 8.7 trillion, has had a gradual change of perspective on Bitcoin. Larry Fink, the CEO of BlackRock, said in 2017 that “Bitcoin only proves the demand for money laundering in the world.” However, in December 2020, he raised that the cryptocurrency could rival the US dollar as a store of value.

This reassessment did not occur because of fear of missing out (FOMO) or lacking due diligence. Since July 2018, the New York firm has researched how to take advantage of the crypto-asset market. Strategist Terry Simpson was in charge of examining whether BlackRock should invest in Bitcoin futures. The intention to include derivatives of the cryptocurrency in two funds seems to indicate that this research yielded a favorable result.

In 2020, BlackRock’s chief investment officer Rick Rieder confirmed that “there is a clear demand for Bitcoin.” Besides, he predicted that it would be “part of investors’ asset pool for a long time.” He even stated that Bitcoin could substitute for gold as a store of value.

These events suggest that BlackRock is increasingly close to becoming the new institutional player managing Bitcoin funds. This way, it adds to the more than 1,200,000 BTC that treasuries and institutional investors are already managing.

Implementation of Regulation on Cryptocurrencies

In recent days, the price of Bitcoin fell by around 10%, reaching below USD 33,000. The pioneering cryptocurrency had reached a new all-time high of USD 42,000 on January 8th.

Fears due to likely crypto regulations during Joe Biden’s administration seem to be one of the main causes. Several operators admitted that the fact that “the new US government may try to regulate cryptocurrencies also adds pressure.”

The price of Bitcoin fell due to concerns about the possibility that the cryptocurrency might be a financial bubble that threatens the stability of the markets.

The US Financial Crimes Enforcement Network (FinCEN) seeks to further regulate exchanges. To do this, they plan to request the address and domicile of those people who buy more than USD 3,000 worth of cryptocurrencies.

Iván Tello, CEO of Decrypto, believes that this will not “tickle” Bitcoin. The reason for this is that it “already complies with Know-Your-Costumer (KYC) standards and requires supporting documentation from users.”

By Alexander Salazar

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