If you think something is a little unusual when one of the world’s most prestigious financial institutions files for a cryptocurrency investment product during a tough regulatory crackdown, you wouldn’t be the only one.
BlackRock, which manages $9.5 trillion in assets, shocked the crypto world yesterday when it filed for a Bitcoin exchange-traded fund (ETF) with the U.S. Securities and Exchange Commission. Experts say that while the product is technically a trust, it is functionally the same as a True Blue ETF, as several eagle-eyed observers on Crypto Twitter pointed out.
Bloomberg senior ETF analyst Eric Balchunas, who defended the “ETF” label on Twitter yesterday, said it’s “the real deal.” Balchunas also noted that BlackRock is virtually undefeated when it comes to battling the SEC, with a 575-1 margin, having received approval from the commission for nearly every one of its ETF applications. That can’t be said of other Bitcoin ETF applicants over the years.
Since 2013, many investment firms have applied for bitcoin ETFs, but have been rejected by Wall Street’s top regulator, which does not allow such products in the United States, citing concerns about market manipulation. ETFs are investment vehicles that track the value of an underlying asset, such as gold, foreign currencies or bitcoin.
Asset managers VanEck, Ark Invest and Bitwise have all been rejected by the regulator. The issue is so contentious that last year Grayscale Investments filed a lawsuit with the SEC after its application to convert its Grayscale Bitcoin Trust (GBTC) into an ETF was rejected.
But BlackRock’s filing is different — and comes at an odd time: The SEC has stepped up its crackdown on the digital asset industry this year, filing lawsuit after lawsuit against crypto companies and even suggesting the space isn’t welcome in the U.S. at all.
BlackRock is no ordinary investment manager, though — it’s the world’s largest. Not only that, but it wants to work with Coinbase (a company BlackRock has worked with before) as a custodian. The SEC sued the San Francisco-based exchange last week for allegedly issuing and selling unregistered securities through its staking service.
“I would say it’s completely shocking,” Balchunas told Decrypt, adding that BlackRock’s move “definitely breathes new life into the whole Bitcoin ETF race and new optimism.”
He went on to say that while he has seen no indication that the SEC has changed its position, the fact that BlackRock filed makes that different.
“Just the fact that it’s BlackRock — it certainly brings some hope,” he said.
BlackRock is a serious institution. The application states that Bank of New York Mellon will be the custodian of the cash held by the trust — another reputable financial institution. According to Balchunas, BlackRock has been very successful in the past in getting ETFs approved.
“BlackRock is an impressive, powerful, large, well-connected company,” Balchunas added. “For them to see something here, I have to give them a lot, and I just give them a lot of respect. So that’s where I’m like, do they know something? What do they see?”
Balchunas said the Twitter debate over how BlackRock’s product should be labeled if approved is meaningless. He noted that the application states the product will be a grantor trust, which would make it similar in structure to the GLD Gold Trust, which everyone thinks of as an ETF.
"You can try to be technical, but we can live with it just being called an ETF because it does fit the spirit of an ETF or the structure. It does qualify as an ETF," he said.
Will BlackRock finally bring Bitcoin to the big party? The current regulatory environment may be difficult to manage, but the Wall Street giant undoubtedly has the best chance. #BTC