BlackRock's Bitcoin spot ETF supervision sharing agreement could bring billions of dollars into the investment market.

The Block interviewed Sui Chung, CEO of CF Benchmarks, a subsidiary of Kraken, which provides the indices used by BlackRock, Valkyrie, and WisdomTree in their applications for a spot Bitcoin ETF. Chung has been closely involved in the Bitcoin ETF application process for years and discussed what sets BlackRock's recent application apart and the potential market size for these funds.

Bitcoin Reference Rate - BRRNY

BRRNY is the Net Asset Value (NAV) reference index for the BlackRock Bitcoin Spot ETF, which measures the difference between the ETF market value and NAV. One of the biggest criticisms of Grayscale GBTC is the significant difference between its market value and NAV, which prevents investors from enjoying the true appreciation of Bitcoin spot.

BRRNY is a daily Bitcoin benchmark index price that aggregates trading data from multiple Bitcoin USD markets operated by major cryptocurrency exchanges that meet the CME CF constituent exchange standards, synchronized with the U.S. traditional financial market closing price at 4:00 PM New York time. It is regulated by the UK FCA under the EU BMR.

According to Sui Chung, out of the 13 ETF applications that have been approved, 7 of them use this benchmark index. In addition to Kraken, the index providers also include Bitstamp, Coinbase, itBit, Gemini, and LMAX Digital.

Surveillance Sharing Agreement Highlight of the Application

Regarding the differences in BlackRock's application documents this time, Sui Chung believes that the real importance lies in the 19-b4 process, where the exchange Nasdaq must demonstrate why the listing of the ETF will not violate the regulations of the Securities Exchange Act.

Nasdaq stated in its application document that it will enter into a Bitcoin Surveillance Sharing Agreement with spot trading platform operators. The surveillance-sharing agreement allows collaborators to share information about market trading activities, clearing activities, and customer identities, reducing the potential for market manipulation. This agreement can help exchanges detect and prevent potential fraud and manipulation, while enhancing market transparency and efficiency.

Impact of Bitcoin Spot ETF on the Market

When asked about the potential impact of the approval of a Bitcoin Spot ETF on the market, Sui Chung believes it is a multi-billion-dollar issue. If ETFs are considered as an investment tool, approximately 60% of U.S. investors hold at least one ETF. This is a significant market. If investors accustomed to investing in ETFs purchase Bitcoin ETFs through long-term savings plans like 401(k), there may be tax advantages within the 401(k) package.

Statistics show that 20% of Americans already own cryptocurrencies. However, buying and selling Bitcoin through exchanges like Coinbase incurs capital gains tax, while buying and selling Bitcoin ETF through a 401(k) enjoys deferred tax benefits, which may attract some cryptocurrency holders.

Note: A 401(k) retirement savings plan is a tax-deferred retirement account established in the U.S. in 1981, with relevant regulations outlined in Section 401(k) of the Internal Revenue Code, hence the abbreviation 401(k) plan.

Although BlackRock's application will not have a decision until early August at the earliest, the Purpose Bitcoin ETF listed on the Toronto Stock Exchange currently holds 25,418 bitcoins, reaching a new high since August last year, with a fund management size of 1.03 billion USD. Recently, the cryptocurrency market and blockchain concept stocks have shown good performance. As for how long this institutional entry market trend will last and whether it will truly usher in a bull market, investors still need to be cautious and manage risks carefully!