BlackRock Embraces Bitcoin, Files Application for Bitcoin Spot ETF

• BlackRock joins Ark Invest, Grayscale, and others applying for Bitcoin Exchange Traded Fund in spite of a zero approval rate.
• Coinbase, which has been accused by the SEC to be a non-compliant company, would take custody of the Bitcoin holdings. 

Trillion-dollar company BlackRock has joined the list of companies awaiting approval for the Bitcoin spot exchange-traded fund (ETF) after applying recently. Other companies expecting to become the first crypto spot ETF in the United States include Ark Investment and Grayscale.

The filing by the Nasdaq stock exchange company with the U.S. Securities and Exchange Commission disclosed that the fund’s Bitcoin holding would be in the custody of Coinbase Custody Trust Company.  Also, its fiat will be in the custody of the Bank of New York Mellon. 

The Shares have been designed to remove the obstacles represented by the complexities and operational burdens involved in direct investment in Bitcoin.

As captured in the filing, the company’s iShares Bitcoin Trust would be traded as Commodity-Based Trust Shares. During regular Market trading, the Bitcoin price would be updated every 15 minutes using the CF Benchmarks Index. 

Does BlackRock Have a Chance?

An interesting fact about the filing is that Coinbase, which is expected to take custody of the Bitcoin holdings, is currently flagged by the SEC as a non-compliant company. A Twitter user identified as “BranBTC” believes that the application would be rejected just as the others. There have been several applications for spot Bitcoin ETF but SEC has not approved any of them.

The document noted that spot exchange-traded products in the commodities and currency markets are usually not regulated. Per observation, SEC relied on the underlying futures market to previously approve trust shares.

As such, the regulated market of significant size does not require that the spot bitcoin market be regulated in order for the Commission to approve this proposal.

Grayscale Sues SEC

With the several rejected applications, Grayscale responded by taking SEC to court for rejecting its Bitcoin BTC spot exchange-traded fund. Former solicitor general Donald Verrilli Jr who represented Grayscale argued at the District of Columbia Circuit Court of Appeals that SEC’s order is not in line with the other approvals given to Bitcoin Futures ETP.

The fundamental problem with the order is that it contradicts previous SEC orders giving the green light to Bitcoin futures ETPs that pose the same risk of fraud and manipulation and have in place the same CME [Chicago Mercantile Exchange] surveillance mechanism to protect against those risks.

Previously, SEC approved investment products from Teucrium, ProShares, VanEck, and Valkyrie. SEC senior counsel Emily Parise dismissed this, claiming the offerings are not comparable. According to him, the Bitcoin spot and futures markets are very correlated and move together almost all the time. This is meant to say that it is not clear whether the spot market is affected when the futures market is impacted by fraud and manipulation. 

In April, Cathie Wood’s ARK Invest together with the European investment firm 21Shares filed their third application after previous rejections. Meanwhile, Bitcoin ETF from investment firm Purpose Investments has been approved in Canada, becoming the world’s first-ever. 

Bitcoin is currently bullish and trading at $25,594.34 as of press time. The approval of BlackRock’s application can send the price beyond $100k. 

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