According to a public document, on June 15th in New York, investment management giant BlackRock submitted an application to the U.S. Securities and Exchange Commission (SEC) for a Bitcoin spot ETF. Similar to BlackRock's other products, this fund is named iShares Bitcoin Trust. If approved, it would become the first publicly traded Bitcoin spot ETF in the U.S. stock market and would be listed on the Nasdaq exchange.
Background on BlackRock
BlackRock is an investment management company headquartered in New York City, with 70 offices in 30 countries and clients in 100 countries worldwide. Its main business is providing investment management, risk management, and financial advisory services to institutional and retail clients. Prominent funds under its umbrella include BlackRock Global Allocation Fund, BlackRock World Mining Fund, BlackRock Latin American Fund, BlackRock Emerging Europe Fund, BlackRock World Energy Fund, and BlackRock New Energy Fund, among others. As of March 2023, BlackRock manages $9.1 trillion in assets.
In the filed document, BlackRock outlined its plans for the iShares Bitcoin Trust, which would appoint Coinbase Custody as the Bitcoin custodian and the Bank of New York Mellon as the cash custodian. The proposed product would use the Bitcoin reference rate from CF Benchmarks, a subsidiary of Kraken, to track the spot pricing continuously.
BlackRock previously partnered with Coinbase in August of last year, enabling its clients to access and trade digital assets, starting with Bitcoin, through BlackRock's investment management platform, Aladdin. Prior to the Coinbase partnership, BlackRock launched the iShares and Blockchain Technology ETF (IBLC) in April 2022. Despite a 75% increase in value this year, the IBLC fund managed assets of only $7 million after more than a year of being listed.
Possibility of Approval for BlackRock's Spot ETF
In April of last year, Ark Investment Management, led by Cathie Wood, and Swiss investment product provider 21Shares attempted to list a Bitcoin spot ETF in the United States but were rejected. They refiled the application in May, only to be rejected again, with the reason stated as, "The Cboe BZX Exchange, on which the ETF was planned to be listed, failed to demonstrate that its proposal met the requirements of preventing fraudulent and manipulative acts and practices as required by the SEC."
In October 2021, Grayscale also submitted a 19b-4 filing to the SEC, seeking approval for a Bitcoin spot ETF to convert GBTC into a Bitcoin spot ETF, but it was likewise rejected. SEC Commissioner Mark Uyeda mentioned during the ICI Global Asset Management Asia Forum in Singapore, "To date, we have had a number of filings that haven't yet met the standards."
Following the rejection, Grayscale even engaged in courtroom debates with the SEC in the U.S. Court of Appeals for the District of Columbia Circuit. The SEC believes that a Bitcoin futures ETF is more resistant to manipulation than the spot market, using this as one of the reasons for rejecting Grayscale's spot ETF application. So far, the SEC has not approved any Bitcoin spot ETFs for listing. Therefore, VanEck CEO Jan believes that it is unlikely for investors to see a Bitcoin spot ETF in the U.S. anytime soon, and there may be no hope for it to be listed within the next year and a half.
Summary
With the recent scandals involving exchanges like FTX and the exposure of misconduct by these well-known companies, cryptocurrencies have become almost taboo in the eyes of regulators. While there are already Bitcoin futures on the U.S. market, there are still significant differences between spot and futures funds.
BlackRock's application for a Bitcoin spot ETF may represent a turning point for the industry as prominent participants from the traditional financial sector recognize Bitcoin's potential. If the SEC eases its policies, these products could flood the market, providing investors with safer investment opportunities and opening the door to a new wave of crypto adoption through regulated and user-friendly investment tools.
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