BlackRock Makes It Easier For Wall Street Banks Like Goldman Sachs To Participate In Its Spot Bitcoin ETF

Updated: 13 December 2023

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Asset management titan BlackRock has revised its spot Bitcoin ETF (exchange-traded fund) application to make it easier for Wall Street banks to participate.

The revised version of the ETF allows for the creation of new shares using cash rather than just cryptocurrency. Under the new arrangement, the banks will also be able to to act as authorized participants for the ETF.

That allows large banks like JPMorgan and Goldman Sachs to circumvent restrictions that currently prevent them from holding Bitcoin and other cryptocurrencies directly on their balance sheets.

The new model was introduced to the U.S. Securities and Exchange Commission (SEC) in a Nov. 28 meeting by six members of BlackRock and three members from Nasdaq.

Under the revised model, authorized participants would transfer cash to a broker-dealer.

This broker-dealer will then convert the cash into Bitcoin before storing it with the ETF’s custody provider, which BlackRock has specified will be Coinbase Custody.

The model will also shift the risk away from authorized participants and place it more in the hands of market makers.

BlackRock said that the new model offers “superior resistance to market manipulation.”

This addresses one of the Securities and Exchange Commission’s (SEC) primary concerns, which has led to the regulator repeatedly denying all prior spot Bitcoin ETF applications.

BlackRock added that the new ETF structure would also strengthen investor protections, while lowering transaction costs and increasing “simplicity and harmonization” across the wider Bitcoin ETF ecosystem.

BlackRock’s Spot Bitcoin ETF Could Open A Trillion-Dollar Floodgate

The potential approval of this new model could lead to a substantial increase in investment inflows into the new product.

It enables trillion-dollar Wall Street banks to participate without directly exposing themselves to crypto.

Regulations currently prohibit these trillion-dollar banks from adding Bitcoin and other cryptocurrencies to their balance sheets.

Prob looking to get them out of the way, clear runway

— Eric Balchunas (@EricBalchunas) November 28, 2023

The SEC must make a decision regarding BlackRock’s application by Jan. 15, with the final deadline set for Mar. 15. ETF analysts, however, predict that the SEC may reveal their decision on several pending applications between Jan. 5-10.