BlackRock Finalizing Details for Bitcoin ETF
BlackRock, one of the contenders in the race to launch a spot Bitcoin exchange-traded fund (ETF), has made amendments to its product details. The company has appointed a ‘Prime Execution Agent’ to handle the buying and selling of Bitcoin on its behalf. However, there are concerns that the Securities and Exchange Commission (SEC) may not approve this arrangement.
The Role of the Prime Execution Agent
A Prime Execution Agent is essentially a third-party broker that executes trades on behalf of an entity. In this case, the agent will be responsible for buying and selling Bitcoin for BlackRock’s ETF.
SEC’s Concerns
The SEC may have reservations about allowing a third-party agent to purchase Bitcoin on behalf of the fund using a cash model. There are concerns that this arrangement may not align with the SEC’s requirements for ETF approval.
BlackRock’s Filing
In its filing, BlackRock stated that shares would only be issued once the Bitcoin Custodian or Prime Execution Agent has allocated the corresponding amount of Bitcoin to the Trust’s account.
Uncertainty Surrounding Coinbase
Although BlackRock has not disclosed the identity of its Prime Execution Agent, it previously named Coinbase as the custodian when it filed for the Bitcoin ETF in June. This choice is likely to raise eyebrows at the SEC due to Coinbase’s ongoing legal battle with the regulatory agency.
The SEC Pushes for ‘Cash Create’
The SEC has been actively engaging with asset managers and exchanges regarding their ETF filings. The regulatory agency is emphasizing the use of a ‘cash create’ method for ETF share creation and redemption over an ‘in-kind’ method, which involves using similar assets.
Predictions for Approval
Analysts predict that there is a 90% chance of approval for the Bitcoin ETF by January 10. However, this estimate remains optimistic given the SEC’s focus on the ‘cash create’ method.
Hot Take: BlackRock’s Third-Party Buyer and Seller Raises Concerns for Bitcoin ETF Approval
BlackRock’s appointment of a third-party Prime Execution Agent to handle Bitcoin transactions for its ETF has raised concerns about potential regulatory hurdles. The SEC may not approve of this arrangement, as it prefers the ‘cash create’ method for ETF share creation and redemption. Furthermore, BlackRock’s previous choice of Coinbase as its custodian adds another layer of uncertainty due to Coinbase’s ongoing legal issues with the SEC. While analysts remain optimistic about ETF approval by January 10, the SEC’s stance and recent communications suggest that the path to approval may not be smooth.
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