Why BlackRock’s bitcoin ETF may succeed where dozens failed

The world’s largest asset manager has successfully filed 575 applications with just one rejection, according to Bloomberg

Ron Day


BlackRock appears to have defied conventional wisdom, and its own previous statements, with efforts to launch the first US bitcoin exchange-traded fund amid a crackdown from regulators.  

The world’s largest asset manager late Thursday filed papers with the Securities and Exchange Commission (SEC) to issue the iShares Bitcoin Trust, just as the SEC has set its sights on crypto exchanges.

Earlier this month, the agency sued Coinbase – BlackRock’s crypto partner in the proposed ETF – and Binance, the world’s largest crypto exchange, for violations including operating as an unregistered securities exchange. SEC chairman Gary Gensler has made no secret of the issues he sees in the crypto industry, telling the Wall Street Journal on 8 June that the space is rife with “noncompliance and hype masquerading as reality”.

The company told ETF Stream's sister publication when it first partnered with Coinbase to offer institutional investors access to bitcoin in August that it had no plans to launch a bitcoin ETF.

“An estimated 20% of Americans have now owned bitcoin at some point. BlackRock’s proposed ETF potentially offers the other 80% an option that is altogether more familiar and accessible,” Sui Chung, CEO of CF Benchmarks, said.

Private spot bitcoin trust

Still, BlackRock, which manages 404 ETFs with $2.4trn assets, may have started preparations for the spot bitcoin fund last year. In the same week last August that it announced its first partnership with Coinbase, it also launched its first spot bitcoin private trust. That trust was available only to institutional clients in the US. 

At the same time, it watched as spot bitcoin ETFs were made available in Europe and Canada and have functioned successfully.

“These products have worked as expected,” Deborah Fuhr, co-founder of ETFGI, said.

Despite the SEC’s refusal to allow Grayscale Investments to create the first spot bitcoin ETF through the conversion of its Grayscale Bitcoin Trust, BlackRock sees a path to success.  

Grayscale has sued the SEC for permission to offer the fund and a decision is expected later this year.

“Grayscale’s court case is causing the SEC to review their stance on only allowing futures-based bitcoin ETFs,” Fuhr added. 

Perhaps the world’s biggest asset manager believes its sheer heft and global reach will help: The company’s $9trn AUM is almost double’s Japan’s gross domestic product, according to the World Bank, and its executives advise companies and governments around the world.  

The New York-based asset manager also has a record that would give it confidence: 575 ETF filings approved by the SEC and one rejected, according to Bloomberg Intelligence’s Eric Balchunas. That’s a .998 win percentage. 

“Due to regulatory filing restrictions, we are not able to provide further comment,” a BlackRock spokesperson said in a statement.

Neither Coinbase nor the SEC replied to requests for comment.

So far, the SEC’s record for a spot bitcoin ETF is also impressive: a perfect 33 attempts and 33 rejections, according to a tally from Bloomberg Intelligence. Still, BlackRock may believe that Grayscale’s lawsuit has a chance and is preparing for a green light, Bloomberg Intelligence’s James Seyffart said in an article

Adding Coinbase as a partner helps BlackRock, Tuscon, Arizona-based SEC attorney Aisha Hunt wrote in an email. Still, the path is not without its roadblocks, she said. 

“The filing is likely to receive resistance from the SEC staff,” Hunt wrote.

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