- BlackRock revised its Bitcoin ETF filing to source Bitcoin from regulated entities like futures exchanges and allow participation from US banks.
- The previous filing planned to source Bitcoin from unregulated spot exchanges and OTC desks, concerning regulators.
- The changes address SEC concerns about manipulation risks and leverage banks’ regulatory experience, bringing the ETF closer to approval.
BlackRock has revised its Bitcoin exchange-traded fund (ETF) filing with the Securities and Exchange Commission (SEC) to address previous concerns raised by the regulator. The new filing outlines plans to source Bitcoin from regulated entities and allow US banks to participate.
Sourcing Bitcoin from Regulated Entities
The notable alteration allows these banks, known as authorized participants or APs in the ETF ecosystem, to use cash instead of bitcoin to create new fund shares. This is a key development because these large U.S. banks, due to strict regulations, are not allowed to hold bitcoin directly.
The revised filing states BlackRock will source Bitcoin from CFTC-regulated futures exchanges and SEC-regulated national securities exchanges. The ETF will not source Bitcoin from unregulated spot crypto exchanges and OTC desks.
Allowing Participation of US Banks
The initial BlackRock filing did not allow US banks to support the Bitcoin ETF. Regulators saw this as problematic, given banks’ experience with fund management, regulation, and compliance protocols.
The revised filing permits US banks to participate in the ETF as authorized participants. This allows banks to create and redeem ETF shares based on demand. Authorized participants help stabilize ETF prices and ensure adequate liquidity.
Impact
The changes address key concerns raised by the SEC in rejecting previous Bitcoin ETF applications. Sourcing Bitcoin from regulated entities reduces manipulation risks. Allowing participation of US banks leverages their regulatory experience in managing fund inflows and outflows.
The revised filing brings the BlackRock Bitcoin ETF closer to potential approval. Other firms planning to file Bitcoin ETFs will likely adopt similar changes to address SEC concerns. Approval of a Bitcoin ETF in 2023 would represent a major milestone for crypto adoption.
