If you think something is out of the ordinary when one of the world’s most prestigious financial institutions applies 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, rocked the crypto world yesterday when it applied to the U.S. Securities and Exchange Commission for a Bitcoin exchange-traded fund (ETF). Though the product is technically a trust, as several eagle-eyed observers on Crypto Twitter have pointed out, it is functionally the same as a true blue ETF, experts say.
It’s the “real deal,” according to Senior ETF Analyst at Bloomberg Eric Balchunas, who defended the “ETF” label yesterday on Twitter. Balchunas also pointed out that BlackRock is nearly undefeated when going up against the SEC, at 575-1, with nearly every single one of its ETF applications receiving the Commission’s blessing. Other Bitcoin ETF applicants over the years can’t say the same.
Many investment firms have applied for a Bitcoin ETF since 2013, only to face rejection from Wall Street’s top regulator—which cites concerns about market manipulation as reasons for not allowing such a product to exist in the States. An ETF is an investment vehicle that tracks the value of an underlying asset, like gold, foreign currencies, or Bitcoin.
Asset managers VanEck, Ark Invest, and Bitwise have all been rejected by the regulator. The issue is so contentious, Grayscale Investments last year hit the SEC with a lawsuit after it said “no” to its application to convert its Grayscale Bitcoin Trust (GBTC) to an ETF.
But BlackRock’s application is different—and it comes at a strange time: The SEC this year has ramped up a fierce crackdown on the digital asset industry, hitting crypto firms with lawsuit after lawsuit and even hinting that the space isn’t welcome on U.S. shores at all.
BlackRock, though, is no ordinary investment manager—it’s the world’s biggest. Not only that, it wants to work with Coinbase as a custodian (a company BlackRock has worked with before). The SEC last week sued the San Francisco-based exchange for allegedly offering and selling unregistered securities via its staking service.
“I would say this is a total shocker,” Balchunas told Decrypt, adding that BlackRock’s move “has definitely breathed new life into the whole Bitcoin ETF race and new optimism.”
He went on to say that although he hadn’t seen anything that indicates that the SEC has changed its position, the fact that it was BlackRock applying makes this situation different.
“It’s just that it’s BlackRock—it should give some hope, for sure,” he said.
BlackRock is a serious institution. And the application says that Bank of New York Mellon would be the custodian for the Trust’s cash holdings—another reputable financial institution. According to Balchunas, BlackRock has been very successful in the past with getting ETFs approved.
“BlackRock is just such an impressive, powerful, big, connected company,” added Balchunas. “And for them to see something here, I have to just sort of give them a lot of, I just give them a lot of respect. And so that’s where I’m like, do they know something? What do they see?”
The debate on Twitter as to how BlackRock’s product, should it be approved, ought to be labeled is much ado about nothing, said Balchunas. He points out that the application states that the product would be grantor trust, which would make its structure similar to GLD Gold Trust, which everyone considers an ETF.
“You can try to be technical, but we’re okay with it just being called an ETF, because it really is in the spirit of the ETF or the structure. It really qualifies as an ETF,” he said.
Is BlackRock finally the one that brings Bitcoin to the big dance? The current regulatory environment may prove difficult to manage, but the Wall Street giant certainly has the best odds yet.
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