BlackRock, which manages about US$10 trillion as the world’s biggest asset manager, has filed to launch the first publicly traded spot Bitcoin exchange-traded fund (ETF) in the U.S., even as regulators in the country file lawsuits against cryptocurrency platforms for alleged violations of securities laws.
BlackRock said in a Thursday filing to the Securities and Exchange Commission (SEC) it intends to launch the “iShares Bitcoin Trust” with Coinbase Custody Trust Co. as the custodian for the Bitcoin. The ETF, if approved, will be listed on Nasdaq.
The application comes after the SEC last week sued Coinbase and Binance.US., two of the industry’s biggest crypto exchanges, for allegedly breaching securities rules. That adds to uncertainties the SEC will approve the ETF, given that a Coinbase unit would act as custodian for the product.
Eric Balchunas, a senior ETF analyst at Bloomberg, tweeted Thursday that the BlackRock filing is a “shocker.”
“There’s been no signs at all SEC willing to approve, but BlackRock is very connected so maybe they know something?” Balchunas said.
Approval of a spot-traded Bitcoin ETF in the world’s biggest economy and largest financial market is seen by many investors as a stamp of approval for the digital currency and would likely unlock significant amounts of institutional investment in Bitcoin.
Chokepoint?
However, some in the crypto industry reacted negatively to the BlackRock development, raising “Operation Chokepoint” theories that suggest governments and traditional finance aim to derail the industry because it poses a threat to their interests.
“If BlackRock’s spot ETF application gets approved, it is undeniable that Operation Chokepoint 2.0 was orchestrated to drive out crypto native companies and bring in large traditional firms that are buddy-buddy with the U.S. [government] to try and control Bitcoin [and] crypto,” Will Clemente, co-founder of digital asset research firm Reflexivity Research, said Thursday on Twitter to his 683,700 followers.
In the SEC filing, BlackRock said: “The Shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange,”
The SEC has previously rejected similar applications for spot Bitcoin ETFs filed by Grayscale, WisdomTree and VanEck. In June 2022, Grayscale sued the SEC for rejecting its application, saying the regulator failed to apply consistent treatment to similar investment vehicles.
The securities regulator, however, has approved a number of Bitcoin futures-based ETFs.
Complex
Traditional retail exchanges and brokers, such as Robinhood and eToro, are “navigating complex terrain when venturing into crypto,” Jeff Feng, co-founder of Sei Labs, the company behind the Sei trading blockchain, told Forkast via email.
“The absence of explicit regulatory guidelines has caused setbacks, leading to some tokens being delisted resulting in crypto market volatility,” said Feng, a former Goldman Sachs analyst. “Nonetheless, these teething issues are part of the broader industry’s evolutionary process.”
Balchunas at Bloomberg added that the BlackRock filing lists the factors that could adversely affect the price of Bitcoin, and “they list the exchanges, which ‘are largely unregulated and may be subject to manipulation’ which is the SEC’s issue with approving ETF.”
Bitcoin gained 1.89% over the past 24 hours to trade at US$25,541 at 11:50 a.m. in Hong Kong, according to data from CoinMarketCap. The world’s largest cryptocurrency by market capitalization has risen 54.5% so far this year, but is still far below its peak at around US$64,000 recorded in November 2021.