The world's largest asset manager has filed an application to launch what would look like a "Bitcoin ETF". So far, the US securities regulator (SEC) has turned down all other applications of this type.
It already seems a long time ago that BlackRock boss Larry Fink considered bitcoin an investment for crooks and criminals. That was in 2017, so it was almost yesterday, but since then things have changed for the biggest asset manager on the planet ($9 trillion).
BlackRock filed an application with the US securities regulator (SEC) on 8 June for the marketing of a product that would resemble a Bitcoin "Spot" ETF, i.e. a product based on real bitcoins, and not simply with virtual exposure. So far, no such application has been accepted by the SEC.
Will BlackRock be more successful? The Big Whale looks into the matter.
What has BlackRock filed?
It's important to understand what type of filing BlackRock has filed: some have talked about an ETF and others about a Trust. In reality, it's a mix of the two products that Larry Fink's group wants to launch. "They want to take the best of both worlds," confirms a lawyer close to the matter.
👉 An ETF (Exchange Traded Funds) is a fund listed on the stock exchange. Its main advantage - which largely accounts for its success - is that an ETF is available to the general public via brokers and banks, and could therefore potentially attract many investors, especially on the US market, which is the largest on the planet. 🌍
👉 A trust, on the other hand, is a private and exclusive financial instrument that is not available to everyone. The main advantage of a Trust is that it is a vehicle that offers more guarantees for investors, particularly in terms of protecting funds - a Trust is not affected by the financial situation of the issuing company.
BlackRock has already launched a Bitcoin Trust in 2022 for its institutional clients. But unlike the new Trust it wants to launch, this one is not listed on the stock market 👀
Does this project have a chance of succeeding?
With its new Trust, which would be listed on the stock market, BlackRock is in any case putting all the odds on its side. "The SEC is very sensitive about consumer protection, especially when it comes to cryptos, and the Trust also provides guarantees in terms of portfolio value transparency", confirms a good industry insider.
The American giant has announced that bitcoin custody will be handled by Coinbase, which has raised many questions. Indeed, the US platform was sued a few weeks ago by the SEC for... "illegal activity" 😅. Except BlackRock didn't sign up with Coinbase, but Coinbase Custody, which is a legally different entity.
"Under US law, each entity of a group is independent, so even if Coinbase is attacked, Coinbase Custody is not directly affected. They will still be able to operate and hold BlackRock Trust bitcoins," a lawyer points out.
What could scupper the project?
Although it's complicated to know precisely, most industry players agree that other Bitcoin ETF projects have previously been rejected because of the lack of financial backing of the companies behind them.
Or BlackRock is the biggest asset manager on the planet. So it's more a political decision by the SEC and its chairman, Gary Gensler, that could scupper the project this time around 🧐.
On this point, there are two opposing views: part of the ecosystem thinks Gary Gensler would have no interest in accepting such a product since it would allow millions of Americans to invest in bitcoin directly. "It would be a very mainstream product," stresses one investor. "What is certain is that if BlackRock's application is rejected, no other will pass," adds a lawyer. At least for a long time.
On the contrary, another part of the ecosystem believes that the filing of this dossier is a godsend for the SEC, which would have the opportunity to show that it is not leading an anti-crypto crusade (read our SEC dossier) , but against players who do not respect the rules such as Coinbase and Binance...
In the meantime, the filing of the dossier is a first step. Now begins a period of at least several months in which the SEC will study BlackRock's proposal and provide feedback. "If the filing goes through, BlackRock's product won't be available until 2024," stresses someone close to the matter.
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