Blackrock Bitcoin ETF: What are the chances of approval?

Blackrock has filed an application for a Bitcoin ETF. What are the chances of approval and why is this likely to pressure the U.S. securities regulator SEC?

The world's largest asset manager, Blackrock, has a Bitcoin ETF application submitted with the U.S. Securities and Exchange Commission. Coinbase has reportedly been selected to hold the cryptocurrency. The same goes for market price data, which must come from the U.S. crypto exchange.

Bitcoin ETF application is no surprise

It is no secret that Blackrock has been working on crypto products for some time. For institutional investors, they already teamed up with Coinbase last year to launch Bitcoin Trust set up. It has also already issued a blockchain and metaverse ETF to create participation opportunities for a wide audience through public companies. In addition, the asset manager actively invests in several crypto companies such as Circle or Marathon Digital Holdings.

As the largest issuer of ETFs, it therefore seems more than logical to also have a Bitcoin ETF. Especially since its CEO, Larry Fink, is a big fan of tokenization. This may not have much to do directly with a Bitcoin ETF, but it certainly shows that the company has studied blockchain technology intensively. Therefore, the insider source's claims that the application for a Bitcoin ETF is in full swing seem credible.

Blackrock: a different company from the Winklevoss brothers

For years, all kinds of asset managers have gritted their teeth over Bitcoin ETF applications to the Securities and Exchange Commission. So far, all applications for a "real" Bitcoin ETF have been rejected. There are already future-based Bitcoin ETFs in the US. But not much can be made of those. A Bitcoin spot ETF for the masses promises significant inflows into the cryptocurrency. As in 2004 with gold, everyone wants to be the first to get approval from the SEC.

The fact that the powerful and politically well-connected asset manager is now submitting a Bitcoin ETF application makes a difference, even though, strictly speaking, there should be none. This should mean that Blackrock can assume that its application is absolutely watertight from a regulatory perspective. It also takes more guts to reject an application from Blackrock than, say, an application from the Winklevoss brothers, who filed their first Bitcoin ETF application in 2013.

Gary Gensler and SEC under pressure

For the SEC, the filing comes at the worst possible time. After all, the regulator and its chairman Gary Gensler are dealing with fierce headwinds from the crypto industry. To now take on Blackrock as well, attracting even more trouble for not being able to adequately justify a rejection of a Bitcoin ETF, would not make political sense for the authority. Especially since, according to SEC chief Gensler's latest statements, Bitcoin is finely off the hook and is not a security but a commodity. Therefore, strictly speaking, the current "crypto securities debate" should not affect Bitcoin as an underlying ETF.

It remains to be seen how the SEC will judge the cooperation with partner Coinbase. On the one hand, the SEC is embroiled in a serious legal dispute with the crypto exchange. On the other hand, it is the largest crypto exchange in the U.S. and the first address for institutional investors. By expressing confidence in Coinbase, Blackrock is also increasing the pressure on the SEC.

Conclusion

Never before has an application for a Bitcoin spot ETF had a greater chance of approval. Blackrock has been monitoring the market for years and will know all the pitfalls to consider in such an application. As the largest ETF manager in the world, they should be able to assess the chances of approval better than anyone else. Gary Gensler will have to think very carefully about a "no" vote.