This move comes at a time when the SEC is actively attacking cryptocurrencies, pushing US crypto firms to open new headquarters overseas. The crackdown does not concern Bitcoin (yet?), but many US investors are pre-emptively withdrawing all kinds of crypto to avoid possible regulatory scrutiny.
In these turbulent times with very little legal clarity and openly anti-crypto authorities, BlackRock’s Bitcoin ETF timing may appear surprising. However, it may also be perfect from other points of view: the rising scepticism related to the US monetary policy, the increasing talk of de-dollarization, and of course, Bitcoin’s own growing maturity as an independent currency are all very good reasons.
Let’s see how spot Bitcoin ETFs could change the current crypto and financial landscape and whether BlackRock can succeed at securing their approval.
The Importance of a Bitcoin ETF
ETFs offer convenient investment vehicles that are easily traded and accounted for. By eliminating the need for investors to manage crypto directly, they mitigate accounting and legal complexities associated with buying Bitcoin.
To BlackRock, Bitcoin is a great way to diversify its holdings and respond to the rising demand from its clients, as mentioned by its CEO Larry Fink in his letter to shareholders in March 2022. Several months later, the firm launched a spot Bitcoin private trust for institutional clients.
An ETF would extend this offer to any investor, be it a financial advisor or a retail client.
While Bitcoin ETFs may not directly contribute to Bitcoin adoption as the coins are held by a centralized entity, they can generate increased demand for the cryptocurrency. Moreover, such ETFs could also confer legitimacy on Bitcoin, enabling broader usage by the American people and businesses, while giving a boost to the development of the Bitcoin ecosystem.
Since 2013, the SEC has been firmly refusing all spot Bitcoin ETFs: VanEck, WisdomTree, Bitwise, Ark Invest, 21Shares, Grayscale… The latter has even filed a lawsuit against the SEC, claiming that the refusal was unlawful.
The reasons for refusals varied: a spot Bitcoin ETF would be “prone to fraud”, the SEC was “concerned about market manipulation”, some companies “failed to demonstrate their ability to protect the investors”…
At the same time, the SEC approved the ETFs based on Bitcoin futures, which are currently under the responsibility of the CFTC (Commodity Futures Trading Commission). These more complex financial products are arguably not less dangerous for investors than ETFs based on spot Bitcoin, which is a source of yet another controversy surrounding the SEC’s very special treatment of the cryptoassets. So far, no legal action could force the SEC to change its mind.
BlackRock, however, is not your ordinary financial firm. It is deeply rooted in the American financial system, and its influence extends far beyond.
There’s no doubt that the political weight of a company dealing with trillions is immense, and could use its deep lobbying pockets on the SEC.
BlackRock could pressure Mr Gensler to lift his self-imposed moratorium on spot ETFs, which would be the first step to acknowledging cryptocurrencies. Other asset managers like WisdomTree and Invesco have already (re)filed similar applications.
Out of BlackRock’s 576 ETF filings, the SEC has so far approved 575, which brings many to believe that Bitcoin spot ETF can become a reality. Bitcoin reacted to the news by surging 16% since last Thursday.
The SEC has until March 2024 to decide on BlackRock’s spot Bitcoin ETF.
Written by D.Center
