BlackRock’s Bitcoin ETF Now Welcomes Participation from Wall Street Banks

BlackRock has made some changes to its spot Bitcoin exchange-traded fund (ETF), tweaking the way Wall Street banks get involved with Bitcoin. The new model, introduced to the US Securities Exchange Commission (SEC) in November, aims to make it simpler for major financial institutions, such as JPMorgan and Goldman Sachs, to join the Bitcoin market. 

Proposed adjustments to the structure of spot Bitcoin ETFs would allow authorized participants (APs) to generate new shares in the fund using cash instead of solely relying on cryptocurrency. Typically, this creates an opportunity for banks that can’t hold cryptocurrencies directly, a crisis in disguise.

Blackrock’s proposed spot Bitcoin ETF

BlackRock’s adjustments to the proposed spot Bitcoin ETF now allow Wall Street banks, constrained by regulations on holding cryptocurrencies, to take a significant role. In this process, the cash used by authorized participants (APs) can be converted into bitcoin through an intermediary and stored by the ETF’s custody provider, as outlined in a memo from a November 28 meeting involving the US Securities and Exchange CommissionBlackRock, and Nasdaq.

There’s a growing sense of hope regarding the potential approval of spot bitcoin ETFs by the SEC, and this could be a game-changer for the digital assets industry, attracting a surge of investment from retail investors. The conventional belief was that APs would primarily be large market-making firms experienced in crypto like Jane StreetJump Trading, and Virtu—not banks. However, this change opens the door for banks to participate and diversify the pool of liquidity providers.

If the SEC gives the green light, BlackRock’s ETF model would result in a noble change for banks, granting them an indirect pathway into the world of Bitcoin, marking a significant departure from the traditional stance of financial institutions on Bitcoin and could likely result in fresh investment opportunities. This is in a sequence of numerous multi-billion-dollar ETF moves by BlackRock, with the most recent in July.

Discussing the implications of the SEC’s acceptance of this revised dual model, CF Benchmarks CEO Sui Chung highlighted, “If the SEC accepts this revised, dual model of create and redeem with cash and physical, that means the liquidity that supports the ETF shares when they trade would be increased, because obviously, you have more potential APs as part of the process.” 

In an interview, he added, “And although trading firms like Jane Street, etc. are large and are experts, they fundamentally don’t have the trillion-dollar plus balance sheets that large American banks have.” 

CF Benchmarks serves as the benchmark administrator for various existing spot Bitcoin ETF applications, including BlackRock’s.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.