How long until BlackRock makes its crypto ETF debut?

BlackRock now partners with a crypto exchange, has a bitcoin trust and a blockchain ETF

Jamie Gordon

BlackRock iShares office sign

BlackRock has caused a stir with a new partnership and product offering clients access to bitcoin, however, many are now questioning when its involvement in crypto will extend to ETFs.

Earlier this month, the world’s largest asset manager announced it was partnering with crypto exchange Coinbase to offer institutional investors access to bitcoin, with BlackRock clients able to purchase the asset on its Aladdin platform.

Last Thursday, a blog post from the firm revealed the launch of its spot bitcoin trust for US institutional clients. Despite arriving without much fanfare from BlackRock itself, the new product marks its first step into wrapping direct crypto exposure in a structured vehicle.

Interestingly, both announcements were accompanied by statements detailing “substantial interest” in the asset class by BlackRock clients.

The firm’s chairman and CEO Larry Fink first revealed this client interest in his annual letter to shareholders in March and added his firm was “studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients”.

Between its recent headway into crypto, client interest, other large asset managers launching wrapped crypto products and its status as the largest ETF issuer, many onlookers assume an ETF or exchange-traded product (ETP) is next on BlackRock’s crypto itinerary.

Among them, Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said: “It may not be far off given they are now committed. It seems like the next logical step.”

However, a spokesperson for the firm told ETF Stream it has “no plans” to launch either a crypto ETP or ETF and the company “has not filed an application” for such as product. 

BlackRock said: “It is worth adding that the Securities and Exchange Commission (SEC) has yet to approve an application for a spot bitcoin ETP.

“In general, any decision as to whether to launch iShares ETPs is based on an array of factors including market and asset dynamics, regulatory considerations and client demand.”

Asset dynamics are a potential sticking point, given what some have described as the recent ‘crypto winter’ and the structural issues seen in stablecoin terra in May.

Michael O’Riordan, founding partner at Blackwater Search and Advisory, said: “I am sure BlackRock would have [launched a crypto ETF/ETP] nine months ago were it not for reputational and probably internal compliance concerns.”

Regulatory barriers such as the SEC’s reluctance to approve a spot bitcoin ETF – likely the route BlackRock would take – also limit how and where the firm would be able to launch its crypto offering.

In Europe, even diversified crypto basket products are wrapped within the less-favoured exchange-traded note (ETN) structure, often termed an ETP, rather than having UCITS ETF status.

“The ETF versus ETP wrapper issue is tricky as they require different platforms, at least in Europe now, so that will put a few players off”, O’Riordan added.

Despite these challenges, other large asset managers have not been put off from entering the space, with WisdomTree launching its bitcoin product in Europe in 2019 and Invesco, Fidelity and Global X all following suit within the last 12 months.

Even if BlackRock does have plans in wrapped crypto products, the experience of other issuers tells us it is no mean feat to bring an institutional-grade crypto exposure to market.

Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, told ETF Stream last November that the firm had been working on the Invesco Physical Bitcoin ETP (BTIC) since mid-2018.

Buxton said: “In the last two to three years, we have been trying to structure a product that looked, from an institutional point of view, as close as possible to a traditional ETF like our gold structure, and that has been the driver of BTIC’s timeline.”

Regardless, this has not been enough to stifle rumours yet more large asset managers – including State Street Global Advisors (SSGA) and UBS Asset Management – could launch their own crypto ETPs.

BlackRock also already has some crypto-adjacent involvement in ETFs after launching its iShares Blockchain and Tech ETF (IBLC) in the US at the end of April.

O’Riordan concluded he thinks it is only a matter of time until BlackRock launches a crypto ETP.

“I could have told you a year ago that BlackRock will do something in the space, but not just BlackRock, all of them will. It is simply a space they cannot ignore.

“The question is in what format will they do it and what product. The market does not need another spot bitcoin ETP.”

Related articles