Thursday, November 30, 2023

BlackRock, the world’s largest asset manager, has recently submitted a registration filing for a bitcoin trust, prompting speculation that it may actually be a disguised spot bitcoin exchange-traded fund (ETF). Despite the U.S. Securities and Exchange Commission’s (SEC) ongoing crackdown on unregistered crypto platforms and securities tokens, BlackRock aims to introduce a bitcoin product. Notably, Coinbase, the Nasdaq-listed crypto exchange currently facing SEC charges for violating securities laws, has been selected by BlackRock as the custodian for the bitcoin trust.

BlackRock’s Filing for a Bitcoin Trust

BlackRock, the global leader in asset management, has filed a registration application with the U.S. Securities and Exchange Commission (SEC) for the Ishares Bitcoin Trust (the Trust), despite the regulatory agency’s intensified scrutiny of the cryptocurrency industry. In the filing, BlackRock outlined the following:

The Trust’s primary assets consist of bitcoin held by a custodian on behalf of the Trust. Its objective is to generally reflect the performance of bitcoin’s price.

The asset manager explained that the Trust was established as a Delaware statutory trust on June 8. BlackRock Fund Advisors serves as the Trust’s trustee, and Coinbase Custody Trust Company has been appointed as the custodian responsible for the Trust’s bitcoin holdings. The Trust’s sponsor is Ishares Delaware Trust Sponsor, an indirect subsidiary of BlackRock Inc.

According to the filing, the Trust issues shares in baskets of 40,000 or integral multiples thereof. Baskets can be redeemed by the Trust in exchange for an equivalent value of bitcoin. Individual shares will be listed and traded on Nasdaq, although redemption will only occur at the basket level.

Many observers perceive BlackRock’s filing as a positive development for the entire cryptocurrency sector. Some argue that the asset manager’s application for a bitcoin trust is essentially a request for a bitcoin ETF, a product not yet approved by the SEC. The regulatory agency has consistently rejected spot bitcoin ETF filings thus far.

The selection of Coinbase as the custodian for the bitcoin trust has surprised some individuals, given the SEC’s current crackdown on the crypto industry and its charges against Coinbase for securities law violations. Ran Neuner, co-founder of Onchain Capital, expressed his surprise in a tweet:

“Did BlackRock really just apply for a spot bitcoin ETF using Coinbase, a U.S. company that the SEC claims is actually an unlicensed securities exchange operating illegally?”

Several individuals drew parallels between BlackRock’s bitcoin trust and Grayscale’s bitcoin trust (GBTC). While Grayscale has actively sought to convert its bitcoin trust into a bitcoin ETF, the SEC has consistently rejected its applications.

CEO Robert Salvador of Digibuild opined that BlackRock’s trust is similar to Grayscale’s and could potentially be utilized for shorting bitcoin. He referred to it as a “Trojan horse” rather than a genuine ETF. Chris O, a Cardano enthusiast, described it as a trust that can be redeemed, effectively functioning as a spot ETF. He suggested that the packaging might be a means to justify its eventual approval.

Eric Balchunas, a senior ETF analyst for Bloomberg, clarified that although BlackRock’s filing pertains to a trust, it shares similarities with other physical commodity ETFs such as GLD (Gold ETF). He emphasized that this filing represents a genuine spot ETF, distinguishing it from GBTC.

Luke Martin, from Venture Coinist, made a comparison to SPY (S&P 500 ETF) and GLD, both structured as trusts. He highlighted the redeemable feature as a key distinction from GBTC.

Congressman Patrick McHenry (R-NC), a proponent of regulatory clarity for the crypto sector, has been critical of SEC Chairman Gary Gensler’s enforcement-centric approach. McHenry emphasized the importance of avoiding favoritism when evaluating the bitcoin trust, stating that he would closely monitor the situation. Gabor Gurbacs, an advisor to VanEck, suggested that earlier spot bitcoin ETF applications should be approved in the order of their filing dates to ensure fairness.

Share your thoughts on whether the SEC will approve BlackRock’s bitcoin trust filing in the comments section below.

Frequently Asked Questions (FAQs) about bitcoin trust filing

Will the SEC approve BlackRock’s bitcoin trust filing?

The approval of BlackRock’s bitcoin trust filing by the SEC is uncertain. While some view it as a positive development, the SEC has historically rejected spot bitcoin ETF filings. The regulatory agency’s ongoing crackdown on unregistered crypto platforms and securities tokens adds further complexity to the approval process. Close monitoring of the situation is necessary to determine the outcome.

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