Fund management behemoth BlackRock filed an application for a bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission (SEC) last Thursday. Submitted via BlackRock’s iShares unit, the world’s largest ETF provider, the fund will be called the iShares Bitcoin Trust, should it be approved.
According to the filing, the fund’s assets will “consist primarily of bitcoin held by a custodian on behalf of the Trust,” and this custodian will be Coinbase Custody Trust Company. As Observers recently reported, the SEC has sued Coinbase for allegedly being an unlicensed broker, securities exchange and clearing agency, although this shouldn’t affect its standing as a custodian.
Price will be updated at a minimum every 15 seconds, based on the index from Kraken subsidiary, CF Benchmarks. From the application: “The Shares have been designed to remove the obstacles represented by the complexities and operational burdens involved in a direct investment in bitcoin.”
If the application is approved it will be the first crypto spot ETF in the U.S. market, although there are existing bitcoin futures ETFs. BlackRock argues that previously approved spot ETF products are unregulated and have been approved based on the underlying futures market, so:
“…the regulated market of significant size test does not require that the spot bitcoin market be regulated in order for the Commission to approve this proposal.”
It has been a long wait for those hoping to launch (or invest in) a spot bitcoin ETF. The first proposal, by the Winklevoss twins, was denied back in March 2017, causing BTC price at the time to drop from $1350 to under $1000.
There has since been a long string of disappointed applicants, including Grayscale, VanEck, and the Winklevoss twins (again) through their Gemini platform. The typical pattern sees the SEC delay judgment on multiple occasions until they can officially delay no more, at that point denying the application.
However, according to Bloomberg analyst Eric Balchunas, BlackRock has a rather impressive record of getting ETF approvals from the SEC, with 575 gained against just one rejection, which came almost a decade ago.
It seems unlikely that BlackRock would file for a bitcoin ETF if it didn’t believe there was a good chance of approval, and perhaps an application from such a big player may be the nudge that the SEC needs to finally succumb.
The review process can be a lengthy one though, with the SEC able to extend the period by up to 90 days at a time, to a maximum of 240 days. That gives them a final deadline of February 2024 to make a decision, but we will be Observing closely in case there is any movement before then, including the potential firing of "tyrannical" SEC chair, Gary Gensler.
