Back in 2017, traditional finance was naturally skeptical of cryptocurrencies. Roll forward to 2023, and BlackRock (NYSE: BLK), under Larry Fink’s governance, is spearheading a new attempt to overturn the SEC’s refusal for spot Exchange Traded Funds (ETF) covering Bitcoin (CRYPTO: BTC). Yet as the world’s largest asset manager with $9.4 trillion in assets — three times more than France’s GDP — what motivates BlackRock’s legal push? How probable is its success, and what are the implications for traditional finance firms and the decentralized finance industry?
BlackRock Filing: The Story
On June 15, BlackRock submitted a surprise filing to the SEC indicating a desire to launch a new ETF that will derive its value solely from spot Bitcoin prices. This is not a novel concept as in 2022, the SEC rejected Fidelity’s application, citing concerns over inadequate surveillance, market manipulation, and potential fraud.
This led industry commentators to believe that BlackRock knows something that others don’t. Indeed, that may be true: BlackRock is the king of the passive investment game and boasts an impressive ETF filing approval rate of 575 to 1. The secret to BlackRock’s filing is exactly the Achilles heel of its predecessors — security. Confronted by the SEC about “unclear filing”, Nasdaq refiled BlackRock’s application on July 3, stipulating a Nasdaq-Coinbase agreement clause under which both sides will collaborate in market surveillance and share the exchange’s data on spot transactions.
That set a precedent. Post-BlackRock filing, surveillance-sharing agreements were included in Fidelity’s, Invesco’s, and WisdomTree’s refilings to the SEC, reflecting traditional finance’s sustained desire for digital asset products.
Grayscale Lawsuit
BlackRock’s filing isn’t the sole reason for the reinvigorated interest in Bitcoin spot ETFs. Grayscale Bitcoin Trust (GBTC) is the largest crypto investment vehicle globally with a closed-end trust totaling more than $23.3 billion in assets, but less than 0.5% of the overall Bitcoin market cap.
Grayscale’s CEO Michael Sonneshein has long pushed for the trust’s conversion into an ETF, as this would allow continuous issuance and redemption of shares and would close the price-NAV discount. However, the SEC rejected…
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