BlackRock Revises Bitcoin ETF: A Strategy to Attract Wall Street Giants!

BlackRock wants to make its spot Bitcoin ETF more accessible to Wall Street banks. The asset manager has indeed revised the operation of its index fund to allow banking giants to participate in the Bitcoin market without violating the regulations they are subject to.

BlackRock revises its spot Bitcoin ETF 

BlackRock is looking to entice Wall Street banks with its recently revised Spot Bitcoin ETF. Indeed, the asset management giant has altered the fund’s operation to enable financial institutions to participate more easily.

Thus, the updated structure now relies on an “in-kind” redemption mechanism known as “prepay”. More specifically, banks will be able to create new shares of the fund by providing cash, not Bitcoins. Thanks to this setup, they avoid directly holding BTC on their balance sheets, which remains prohibited by the regulation.

Consequently, this paradigm shift is expected to significantly broaden the pool of authorized participants (APs) in the ETF. Giants such as JPMorgan, Goldman Sachs, or Morgan Stanley, with tremendous balance sheets, could thus partake in the fund.

Moreover, the cash provided by the APs would be converted into bitcoins by an intermediary before being deposited with BlackRock’s ETF custodian, Coinbase. This structure thus distances the participating banks from crypto risk.

BlackRock emphasizes the resilience of its fund

In its argument to the American stock market regulator, BlackRock asserts that this structure strengthens the fund’s resistance to manipulation and market abuses. An essential point in the eyes of the SEC, which has rejected previous Spot Bitcoin ETF applications.

Furthermore, the asset manager also highlights improved investor protection, reduced transaction costs, and a harmonization of the Bitcoin ecosystem.

In addition, BlackRock has met with the SEC twice in November regarding this ETF application, and once again in early December. The SEC must make its decision before January 15, with a final deadline of March 15. Other players like Grayscale and Bitwise are also awaiting a green light. 

Optimism is growing regarding potential approval. Indeed, this green light would pave the way for massive flows of institutional capital into Bitcoin, through a vehicle that is much more reassuring to them than direct investment.

In conclusion, with this restructuring, BlackRock seems to have understood the SEC’s reservations, particularly regarding manipulation risks. Moreover, the banks’ participation also provides a seal of respectability. The Wall Street giant has thus put every chance on its side. Now all that remains is to await the SEC’s verdict on what would be a minor revolution.