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Asset management giant BlackRock applies for a Bitcoin spot ETF! Coinbase and BNY Mellon to serve as custodians

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Asset management giant BlackRock applies for a Bitcoin spot ETF! Coinbase and BNY Mellon to serve as custodians

Asset management giant BlackRock submitted an application for a spot Bitcoin ETF to the U.S. Securities and Exchange Commission (SEC) yesterday, enlisting Coinbase and the Bank of New York Mellon as custodians for Bitcoin and cash, respectively. Will it have a chance to become the first spot Bitcoin ETF in the United States?

BlackRock Files for Bitcoin Spot ETF

According to the application document submitted to the SEC, BlackRock's subsidiary, iShares Delaware Trust Sponsor, has filed for a Bitcoin spot ETF named "iShares Bitcoin Trust."

The trust fund's assets will mainly consist of Bitcoin held by a custodian, aiming to reflect the performance of Bitcoin prices.

The Bitcoin custodian will be provided by a subsidiary of Coinbase, with The Bank of New York Mellon serving as the cash custodian, and the CME CF Bitcoin Reference Rate will be used as the ETF's net asset value benchmark.

If this ETF is successfully issued, it will be listed on Nasdaq and will be issued and redeemed in units of 40,000 shares or multiples thereof.

First Bitcoin Spot ETF Yet to Emerge

As one of the world's largest asset management groups with assets under management in the trillions, BlackRock has been the strongest challenger in recent years to apply for a Bitcoin spot ETF with the SEC.

However, BlackRock's choice of Coinbase as the Bitcoin custodian may not be a wise decision, as SEC Chairman Gary Gensler publicly stated in March this year that investment advisors should not rely on cryptocurrency exchanges as qualified custodians.

While the SEC has approved the issuance of multiple Bitcoin futures ETFs in the past, Bitcoin spot ETFs have been reluctant to pass through. Applications from companies like Grayscale and Ark have also been rejected multiple times.

The main reason for the SEC's blockade lies in the unregulated nature and significant decentralization of the Bitcoin spot market. In case of any issues, such as clearing and custody problems, the SEC cannot fully protect investors.

With Bitcoin spot still difficult to regulate, it remains to be seen whether BlackRock will have the opportunity to gain SEC approval.

Is BlackRock's Application Considered an ETF?

Following the exposure of the application document, Anthony Pompliano, co-founder of cryptocurrency investment firm Morgan Creek Digital, stated on Twitter that BlackRock's application does not qualify as a Bitcoin ETF because the product is applied for under the name of a trust fund, "Trust."

Pompliano agrees that trusts are similar to ETFs and states that although the two products differ technically, especially in terms of regulatory approval, they are similar to investors.

In addition, Pompliano compared it to Grayscale's Bitcoin Trust GBTC, noting that unlike GBTC, BlackRock's trust allows for redemption. If approved by the SEC, Pompliano believes this will also help in the approval of a true Bitcoin ETF.

Furthermore, in order to compete with it, GBTC may introduce a redemption mechanism and reduce fees. Other companies on Wall Street may also follow suit with similar products after seeing BlackRock's success.

However, Bloomberg's senior ETF analyst Eric Balchunas opposed Pompliano's statement, saying that the product applied for by BlackRock is indeed a trust, but it is also like GLD issued by SPDR Gold ETF, a physical ETF issued under the name of a trust, as their structures are similar.