According to recent reports, the asset manager points out the potential instability of stablecoins such as Tether USD (USDT) and Circle USD (USDC), designed to hold a value equivalent to a specific asset or currency, usually the US dollar.
BlackRock, the leading asset manager in traditional finance, has highlighted the potential risks associated with stablecoins for investors considering its proposed iShares Bitcoin spot exchange-traded fund (ETF).
Despite BlackRock’s significant involvement in the cryptocurrency industry, such as pursuing a Bitcoin spot ETF and registering an Ethereum trust, it is now expressing concerns about the impact of currency price fluctuations stable on ETF’s performance.
BlackRock Raises the Alarm
BlackRock highlights that past events have shown that these digital assets can experience significant price movements, which in turn can affect the value of Bitcoin. The concerns arise from incidents involving Tether traders on February 17, 2021 and October 15, 2021, where legal action was taken due to false claims that their reserves were not fully backed by US dollars. As a result, Tether faced sanctions and restrictions.
Additionally, on March 10, 2023, USDC experienced a deviation from its $1.00 peg when it was revealed that a portion of its reserves had been held at Silicon Valley Bank after it entered Federal Deposit Insurance Corporation (FDIC).
This incident raised concerns about the stability and reliability of stablecoins. Blackrock states. While the Trust does not invest in stablecoins, it may be exposed to the risks that stablecoins pose to the bitcoin market and other digital asset markets.
BlackRock concludes that indirect exposure to stablecoins could pose significant risks to investors in its Bitcoin ETF, considering the potential volatility, operational difficulties, potential manipulation practices, and regulatory challenges associated with stablecoins.
BlackRock’s disclosure emphasizes the complex and evolving nature of risks in the cryptocurrency market, highlighting the importance of investors being aware of the underlying assets of financial products linked to digital currencies.
Cathie Wood Questions Gensler’s Stance on Bitcoin ETF
During a recent interview with CNBC, Cathie Wood, CEO of ARK Invest, weighed in on the current status of Bitcoin ETF approvals by the US Securities and Exchange Commission (SEC). Wood expressed confusion about SEC Chairman Gary Gensler’s stance on bitcoin ETFs, given his extensive knowledge of the digital currency, noting that he taught about BTC at the Massachusetts Institute of Technology (MIT).
Wood highlighted the decentralized and transparent nature of the Bitcoin network, stating that all activity can be closely tracked. She argued that these characteristics make it very unlikely that the market will be manipulated.
Given the inherent transparency and accessibility of the Bitcoin ecosystem, Wood questioned the logical reasoning behind Gensler’s hesitation to approve a spot Bitcoin ETF. To understand Gensler’s perspective, Wood speculated that Gensler’s interest in the Treasury Secretary position, which focuses on the stability of the US dollar, could be influencing his stance on Bitcoin ETFs. Wood suggested that Gensler’s potential concerns about Bitcoin’s impact on the dollar could be a factor in his reluctance to approve ETFs.
The SEC has received multiple applications for Bitcoin ETFs, but so far none have been approved. Market participants and investors have been eagerly awaiting the SEC’s decision as the introduction of a Bitcoin ETF would provide more accessible and regulated exposure to the cryptocurrency market.
By Leonardo Perez