Original author:Jaleel、Jack，BlockBeats
Original editor: Jack, BlockBeats
This morning, BlackRock, one of the worlds largest asset management groups, submitted a document application for a spot Bitcoin ETF to the US SEC through its subsidiary iShares, which attracted great attention from the English community. According to the application documents, the ETF is named iShares Bitcoin Trust and its assets are mainly composed of Bitcoins held on behalf of the trusts custodian, and the custodian is managed through the cryptocurrency trading platform Coinbase.
With the recent regulatory pressure from the SEC and the fact that many spot Bitcoin ETFs have not been approved, the Bitcoin ETF application of the worlds largest asset management giant is very surprising. Variant Fund consultant and practicing attorney Jake Chervinsky (@jchervinsky) wrote on Twitter: “The SEC has steadfastly refused to approve a spot Bitcoin ETF for many years, and this attitude has become ingrained. Knowing the SEC’s negative attitude towards this, BlackRock Still hoping to list a Bitcoin ETF on Nasdaq. Each of us should know how important this is, right?”
As an asset management company with assets under management exceeding US$10 trillion, BlackRocks assets under management even far exceed Japans GDP of US$4.97 trillion in 2018. BlackRock, Vanguard Group, and State Street were once known as the Big Three and controlled the entire index fund industry in the United States. Therefore, BlackRock submitted a spot Bitcoin ETF document application to the US SEC, which caused a lot of heated discussion in the community.
BlackRock files for Bitcoin ETF, crypto community reacts negatively
Although for the industry, BlackRocks spot ETF application is a huge benefit. However, some crypto industry practitioners do not seem to support BlackRock’s application for a spot Bitcoin ETF. According to the rules of Bitcoin spot ETF, the fund company is responsible for buying, selling and storing physical Bitcoin and creating corresponding ETF shares for trading on the stock exchange. Therefore, Bitcoin ETF is only an asset that tracks the price of Bitcoin. Investors purchasing Bitcoin ETF are equivalent to investing in Bitcoin indirectly. They own Bitcoin fund shares that are available for trading, rather than directly holding Bitcoin. This goes against the spirit of encryption to a certain extent: Your keys, your bitcoin. Not your keys, not your bitcoin.
In addition, BlockBeats found that most people in the English community did not regard BlackRocks Bitcoin ETF application as a positive signal as in the past regarding BlackRocks contrarian operation to withstand regulatory pressure. Among the comments on the Twitter platform about the Bitcoin ETF application, traditional financial giants, financial elites, and even Operation Choking Point 2.0"” and other words appear frequently.
Well-known KOL AutismCapital (@AutismCapital) believes that BlackRock’s choice to launch an ETF under regulatory pressure from the U.S. Securities and Exchange Commission (SEC) likely means that the SEC may be conducting a cleanup operation. The goal is to eliminate low-level scammers in the encryption field so that the elite giants of traditional American finance can rebuild the game platform according to their own rules.
Hsaka (@HsakaTrades) listed several traditional financial giants’ entry into the encryption industry on Twitter, hinting at the “giant financial” attributes of BlackRock’s application for a Bitcoin ETF:
-BlackRock’s application for a spot Bitcoin ETF;
- Soros Fund Management says TardFi is ripe for cryptocurrency acquisition;
- Rumors that Citadel-backed cryptocurrency exchange EDX will launch later this year;
Previously, Dawn Fitzpatrick, CEO of Soros Fund Management, spoke at the Bloomberg Investment Summit and said that the time for encryption technology to be acquired by traditional finance (TradFi) is ripe. Dawn Fitzpatrick said that cryptocurrencies are here to stay and that there is currently a huge opportunity for existing traditional financial companies to really lead the industry. In addition, financial giants including Citadel Securities, Charles Schwab and Fidelity Digital Assets announced the launch of cryptocurrency exchange EDX Markets. Many people believe this is the latest evidence of Wall Street’s progress in digital assets during the crypto winter.
Scimitar Capital partner thiccy (@thiccythot_) pointed out that the US Securities and Exchange Commission has approved quite a few Bitcoin futures ETFs, but there are no spot ETFs, and the asset management scale of spot ETFs currently traded in the US stock market is very small. In thiccy’s view, spot ETFs are “junk,” and the U.S. Securities and Exchange Commission has long denied spot ETFs, citing concerns about market manipulation and the lack of oversight-sharing agreements between “huge regulated markets” and regulated exchanges. This concern is justified, as Coinbase and other US exchanges account for less than 10% of Bitcoin spot trading volume. Thiccy wrote in a tweet.
Bloomberg senior ETF analyst Eric Balchunas (@EricBalchunas) believes that there is no indication that the SEC will approve the application, but given BlackRock’s close relationship with them, maybe BlackRock knows something? Another interesting point: Coinbase gets a custody win, but if spot ETFs are approved, it will lose customers and fee pressure on trading costs. Think about it, why should I pay Coinbase 40-100 basis points per trade when the ETF is 1 basis point?
Is the real regular army going to enter?
BlackRock’s application for a spot Bitcoin ETF did not come without warning. As early as the beginning of 2021, BlackRock CEO Larry Fink publicly stated that he was optimistic that Bitcoin will become a global market asset. Its fixed income chief investment officer Rick Rieder later also said that BlackRock has begun to get involved in Bitcoin.
That same year, BlackRock said its Global Allocation Fund gained some Bitcoin exposure through CME’s Bitcoin futures issuance. Two of BlackRocks fund companies, BlackRock Global Allocation Fund and BlackRock Funds V, stated in their investment prospectuses (497 Prospectus) submitted to the U.S. Securities and Exchange Commission that one of their Some funds may participate in the trading of futures contracts based on Bitcoin. The investment prospectus also stated that not all Bitcoin futures contracts are available for investment, but are cash-settled Bitcoin futures registered with the U.S. Commodity and Exchange Commission (CFTC).
Source: BlackRock Funds V 497 Prospectus
Interestingly, in addition to its experience in gaining exposure to Bitcoin, this is not the first time BlackRock has partnered with Coinbase.
BlackRock’s past cooperation with “crypto regulars”: Coinbase and Circle
On August 4, 2022, BlackRock announced an agreement with crypto exchange Coinbase to provide institutional investors with cryptocurrencies, starting with Bitcoin. According to a Coinbase blog post, BlackRock will use Coinbase Prime to provide the service, which will give its Aladdin institutional clients access to crypto trading, custody, prime brokerage and reporting capabilities.
On August 11 of the same year, BlackRock launched a private trust to provide US institutional clients with spot Bitcoin risk exposure. The trust will be available to institutional clients in the United States and will be BlackRock’s first product with direct exposure to the price of Bitcoin. Despite the sharp decline in digital asset markets, we continue to see strong interest from some institutional clients in how to leverage our technology and product capabilities to efficiently and affordably acquire these assets, BlackRock said in a statement.
Regarding USDC issuer Circle, BlackRock participated in Circle’s $400 million financing round in the second quarter of 2022, and Circle also invested most of its reserves in government money market funds managed by BlackRock. Circle Reserve Fund. As of the time of writing, according to the official pages of BlackRock and Circle, the assets of the Circle Reserve Fund have reached US$24.787 billion, accounting for approximately 86% of Circle’s total reserves (US$28.5 billion). The remaining funds will be temporarily retained by banks. deposit.
In January this year, the Bank Policy Institute (BPI), a well-known financial think tank, also released a research article stating that USDC may become a backdoor central bank digital currency (Backdoor CBDC) with the help of BlackRock.
The research found that BlackRock has planned to apply to allow the fund to use the Federal Reserve’s Overnight Reverse Repurchase Agreement Facility (ON RRP). Once approved, this means that anyone who wishes to hold an equivalent amount of reserve dollars in the Federal Reserve can do so by purchasing USDC. USDC will therefore become a Backdoor CBDC and anyone in the world can purchase USDC through USDC. Conduct ON RRP in the Fed system.
BlockBeats previously reported that the trading pair used by USDT in the Curve 3 pool for FUD, selling and arbitrage recently was USDC. (Related Reading:USDT is facing severe selling pressure. Are market makers exiting?》）
Operation Choking Point 2.0
In the discussion about BlackRock’s spot ETF application, another popular opinion in the community is “Operation Chokepoint 2.0”. Well-known KOL and serial entrepreneur Andrew (@AP_Abacus) pointed out the delicate timing of BlackRock ETF application in his tweet:
-The U.S. Securities and Exchange Commission sued four large cryptocurrency trading platforms, including Gemini, Coinbase, Binance US and Kraken. This means they could be investigated for alleged violations of U.S. securities trading regulations.
-At the same time, the Federal Reserve closed Silvergate Bank and Signature Bank, two banks known to provide services to cryptocurrency businesses.
-Furthermore, the Federal Reserve is deciding whether to approve related requests from two cryptocurrency-friendly banks, Custodia Bank and Protego Trust.
-At this time, BlackRock began to apply for a Bitcoin ETF.
Since February this year, rumors have begun to increase that the US authorities want to strengthen supervision. First, Coinbase CEO Brian Armstrong revealed that there are rumors that the US SEC may ban cryptocurrency pledge services for retail investors. Then, multiple sources said that the Federal Reserve and financial regulators were taking large-scale actions to put pressure on the banking industry and make it impossible for crypto companies to obtain bank accounts, thereby severing the connection between cryptocurrencies and banks.
In March, several U.S. banks were forced into bankruptcy and liquidation. It was later discovered that several banks that were liquidated, including Signature Bank, Silicon Valley Bank and Silvergate Bank, were all banks friendly to the crypto industry. A large part of Signature Banks daily business is related to the encryption industry. Many people believe that the Biden administration is now executing what appears to be a coordinated plan across multiple agencies to block funding channels for banks and crypto companies, calling this trend Operation Choking Point 2.0.
The name Operation Choking Point 2.0 comes from a program launched by the U.S. Department of Justice (DOJ) in 2013 to combat fraud and illegal activities, such as money laundering and drug trafficking. The U.S. government is blocking certain businesses from accessing financial services by putting pressure on banks that do business with high-risk merchants. The measure sparked some controversy at the time because it led to a severe liquidity crisis for many legal but politically risky businesses, and was seen as an Obama-era effort to eliminate legal but politically risky businesses. Unpopular banking movement.
After the bankruptcy of the above-mentioned crypto-friendly banks, American crypto companies seem to have become “homeless” in terms of banking services. According to CoinDesk, most banks have remained silent on the issue, and some have made it clear that they are unwilling to accept crypto customers.
Will Clemente (@WClementeIII), co-founder of digital asset research company ReflexivityRes, said on Twitter that if BlackRock’s spot ETF application is approved, then “Operation Choking Point 2.0” is most likely well-planned. Aims to drive out crypto-native companies and bring in large traditional companies that have partnered with the U.S. government in an attempt to control Bitcoin and cryptocurrencies.
Of course, these views are all unilateral guesses from the community, and there is no authoritative official document as actual evidence.
Can BlackRock’s spot ETF application be approved?
Another topic that has sparked discussion in the community is whether the BlackRock Bitcoin ETF can pass. Previously, the SEC has approved some futures-based Bitcoin ETFs, but has never approved attempts to open a spot Bitcoin ETF, including Jacobi Asset Management, Bitwise, Valkyrie, Kryptoin, SkyBridge, NYDIG, GlobalX Digital Assets, One River , WisdomTree, etc.
In April last year, Cathie Wood’s Ark Investment Management and Swiss investment product provider 21 Shares tried to list a Bitcoin spot ETF in the United States, but were rejected. The two companies subsequently resubmitted an application in May, which was rejected a second time. The reason for the rejection was that Cboe BZX Exchange, where the ETF plans to be listed, failed to prove that its proposal complied with the SECs requirements to prevent fraud and other malicious intent. behavioral requirements.
Image source @thiccythot_
In October 2021, Grayscale also submitted a 19 b-4 document to the US SEC to apply for a Bitcoin spot ETF, hoping to convert GBTC into a Bitcoin spot ETF, but it was also rejected. SEC Commissioner Mark Uyeda said on the sidelines of the ICI Global Asset Management Asia Forum in Singapore: So far we have received a lot of applications, but none of them have been approved. Uyeda said that if there are applications submitted by trading platforms, the SEC will review them based on their actual circumstances. circumstances will be taken into consideration.
After Grayscales application was rejected, it even launched a court battle with the SEC in the District of Columbia Court of Appeals. The SEC believes that Bitcoin futures ETFs are more resistant to manipulation than the spot market, and used this as one of the reasons for rejecting Grayscale’s spot ETF application. Judge Rao expressed doubts about this: The SEC needs to explain how it understands the relationship between Bitcoin futures and spot prices. A futures is essentially just a derivative. They are together 99.9% of the time, so in the SECs view What is the difference between the two? The SEC also argued that 99% correlation is not equivalent to causation. Futures data only refers to daily prices, not intraday prices. In the SECs view, Bitcoin spot The market is undisputedly decentralized, in stark contrast to Bitcoin futures, which only trade on the Chicago Mercantile Exchange (CME).”
To date, the SEC has not approved the listing of any Bitcoin spot exchange-traded funds (ETFs). Therefore, VanEck CEO Jan believes that investors are unlikely to see Bitcoin spot ETFs in the United States soon, and may not be listed in the United States within the next year and a half. Interestingly, CustodiaBank founder and CEO also started a poll:
If BlackRock’s Bitcoin Spot ETF application is approved, what do you think the U.S. government is?
1. Corrupt;
2. Responsible and problem-free
Among them, more than 80% of voters believed that if the ETF application is approved, it will further reflect the corruption of US authorities.
On the question of whether BlackRocks application will be approved, Scimitar Capital partner thiccy (@thiccythot_) believes that as the largest and most respected asset management company, BlackRock may establish a special relationship with the SEC. In addition, as Republican pressure on Gensler mounts, the SEC may make some arbitrary decisions. In thiccy’s view, if BlackRock’s ETF is approved, it will be a huge boost to the encryption industry.
