BlackRock Demands Coinbase Process Bitcoin ETF Withdrawals Within 12 Hours Amid Concerns Over Custody Practices

Updated: 25 September 2024

Fact Checked by Kevin Hamlin

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Trillion-dollar asset manager BlackRock has filed an amendment for its spot Bitcoin ETF (exchange-traded fund) demanding Coinbase process BTC withdrawals for its fund within 12 hours amid growing concerns over the exchange’s on-chain settlement practices.

BlackRock’s Sept. 16 filing comes after concerns were raised regarding how Coinbase custodies ETF funds, with investors asking the US crypto exchange to provide on-chain proof of the BTC that it has bought on behalf of its spot BTC ETF clients.

BlackRock Filing Follows Increased Investor Concerns

The BlackRock filing comes after investor concerns intensified last month after Coinbase revealed that it was working on developing its own wrapped version of BTC, called Coinbase Wrapped BTC (CBBTC).

Coinbase currently provides custody services to 10 of the 11 spot BTC ETFs that were launched this year in the US.

Despite these funds recording substantial inflows throughout 2024, the leading crypto’s price movement has been stagnant over the last 3 months. Investors have subsequently questioned why the uptick in capital is not impacting BTC’s price.

Bloomberg ETF analyst Eric Balchunas also shared his take on why the ETFs’ inflows have not impacted BTC’s price much. In a Sept. 15 post on X, he attributed the minimal effect to selling activity by “native HODLers” who are offsetting the purchases made by the ETFs.

I get why these theories exist and ppl want to scepegoat the ETFs. Bc it is too unthinkable that the native HODLers could be the sellers. But they are. The call is coming from inside the house. All the ETFs and BlackRock have done is save btc’s price from the abyss repeatedly.

— Eric Balchunas (@EricBalchunas) September 14, 2024

Coinbase CEO Responds To Growing Concerns

Coinbase CEO Brian Armstrong partially responded to the concerns in a Sept. 14 post on X, saying that all ETF transactions are ultimately settled on-chain.

With regards to why the exchange has not released any on-chain proof, he said that he doubts the company’s institutional clients “want people dusting all their addresses.”