By
Chimamanda U. Martha
April 26th, 2024
The SEC has received an official application from BlackRock for a spot Bitcoin ETF to help investors benefit from BTC without direct access.
American investment company and asset manager BlackRock (NYSE: BLK) has submitted an application to the US Securities and Exchange Commission (SEC) for a spot bitcoin exchange-traded fund (ETF).
On Thursday, BlackRock applied for the iShares Bitcoin Trust ETF, noting that major crypto exchange Coinbase (NASDAQ: COIN) will serve as the Bitcoin custodian. The application also states that Bank of New York Mellon (BNY Mellon) would serve as the custodian for cash holdings.
According to the filing, BlackRock intends for the Bitcoin ETF to help interested entities invest without direct access to Bitcoin. In addition, BlackRock notes that the Bitcoin ETF will help interested investors avoid any complexities involved in direct exposure to Bitcoin while maintaining the corresponding intrinsic value. BlackRock stated in the filing:
“Although the Shares are not the exact equivalent of a direct investment in bitcoin, they provide investors with an alternative method of achieving investment exposure to bitcoin through the securities market, which may be more familiar to them.”
BlackRock’s Chance of a Bitcoin ETF
Based on precedence, BlackRock has a slim chance of securing approval for its Bitcoin ETF. So far, the US SEC has rejected all attempts at a spot Bitcoin ETF. Last month, Cboe Global Markets submitted its third application after the SEC rejected the previous two. The SEC has also denied proposals submitted by the New York Digital Investment Group (NYDIG), Grayscale Investments, and Fidelity Investments.
The SEC rejected all applications for spot Bitcoin ETF, claiming in each case that the proposals are incomplete. According to the commission, each attempt provided inadequate measures to protect investors from fraudulent or unscrupulous activity.
These rejections have been met with backlash from the proposers and the general crypto community. In October last year, Grayscale filed a lawsuit against the SEC for the rejection and received support from Coinbase. The SEC had denied Grayscale’s proposal to reorganize its $13.5 billion GBTC fund as a spot Bitcoin ETF in June of the same year. At the time, the commission believed Grayscale’s application did not adequately cater to investor protection and market manipulation.
Grayscale responded by filing a Petition for Review on the same day of the rejection. At the time, CEO Michael Sonnenshein said the SEC had no reason to deny the application. In a Question and Answer (Q&A) session weeks after, Grayscale Chief Legal Officer Craig Salm described the SEC’s acceptance of Bitcoin futures ETFs, and rejection of spot ETFs as “arbitrary and capricious…[and] unfair discrimination”.
Although Grayscale seems confident, it plans to refund investors if it loses the case. According to a Wall Street Journal report, the firm would return up to 20% of Grayscale Bitcoin Trust’s outstanding shares via a tender offer. This offer is a direct solicitation to shareholders to sell their shares.
