BlackRock’s Bitcoin ETF Invites Banks’ Participation

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BlackRock's Bitcoin ETF

BlackRock’s Bitcoin ETF Invites Wall Street Banks

BlackRock’s proposed Spot Bitcoin ETF has significantly changed its structure, allowing Authorized Participants (APs), primarily Wall Street banks, to generate new shares in the fund using cash rather than exclusively relying on cryptocurrency. BlackRock’s Bitcoin ETF is one of the most highly anticipated developments in the crypto industry.

The latest development on BlackRock’s Bitcoin ETF is particularly noteworthy, because it offers banks that cannot directly hold cryptocurrencies the opportunity to participate as APs. The decision came after a meeting involving the U.S. SEC, BlackRock, and Nasdaq, emphasizing the role of cash in this process. Money used by APs can be converted into Bitcoin through an intermediary and stored by the ETF’s custody provider.

Previously, there was a common assumption that APs would primarily consist of large market-making firms with expertise in cryptocurrency rather than banks. However, BlackRock’s modification allows banks to become integral parts of ETFs and enhances their role as liquidity providers.

Image source: BlackRock’s Bitcoin ETF latest developments (Memo)

The significance of this change is highlighted by comments from CF Benchmarks CEO Sui Chung. He noted that if the SEC accepts this revised dual model involving cash and physical assets for creating and redeeming shares, it would increase liquidity in the ETF market due to the inclusion of more potential APs. He pointed out that American banks, unlike trading firms, possess trillion-dollar-plus balance sheets that can support ETF funds effectively.

As the world’s largest asset manager with approximately $8.5 trillion in assets under management (AUM), BlackRock continues to advance its application for a spot Bitcoin exchange-traded fund (ETF) as regulatory approval seems more probable.

This latest update, detailed in a memorandum from the U.S. Securities and Exchange Commission (SEC), permits authorized participants to create new shares in the proposed Bitcoin ETF using cash. BlackRock’s decision to invite Wall Street could provide some of the world’s largest banks with an attractive avenue for gaining exposure to Bitcoin.

Analysts anticipate that approval of BlackRock’s spot Bitcoin ETF could bring unprecedented institutional capital into the crypto market, potentially driving Bitcoin prices to new all-time highs. Furthermore, other major Wall Street institutions may explore Bitcoin through this product.

Notably, world-renowned banks like JPMorgan and Goldman Sachs, which have been unable to directly benefit from Bitcoin’s stellar performance due to the complexities and responsibilities associated with cryptocurrency custody, could leverage their participation as authorized participants in BlackRock’s ETF. These notable banking institutions could allocate some of their substantial balance sheets to Bitcoin.

The process involves cash used by APs being converted into Bitcoin through an intermediary and stored by the ETF’s custody provider. This change allows banks to be more involved, broadening the ranks of liquidity providers.

Regarding the timeline, optimism is increasing regarding the SEC’s potential approval of BlackRock’s spot Bitcoin ETF, with estimates suggesting a possible approval window opening on January 5, 2024. While price predictions for an impending Bitcoin bull market have been optimistic, the participation of the country’s largest banks in Bitcoin through this product could mark the beginning of a genuine institutional era for this asset class.

Disclaimer: articles and their external content are not financial advice but are only used for educational purposes. Always Do Your Own Research (DYOR) first. Reporting is not endorsing, we are here to deliver unbiased news with less intrusive ads.

Ed Umbao

Founder of | co-Founder of

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