BlackRock’s iShares arm on Thursday filed for an ETF that will hold physical bitcoin. Numerous issuers have thrown their hat into the same ring, and none succeeded in launching a product. However, given its status in the ETF industry at a global level, if successful, BlackRock has the potential to dominate the space, even if it doesn’t achieve first-to-market status.
“The SEC has been consistently against spot-based bitcoin ETFs trading. They have concerns about fraud and manipulation. However, if a product were to go to market it would be a huge success given BlackRock’s industry leadership and connections with advisors,” said VettaFi Head of Research Todd Rosenbluth.
A Long Wait
Certainly, the wait for a physical bitcoin ETF has been long and tumultuous. More than a decade ago, Cameron and Tyler Winklevoss filed with the SEC to launch the Winklevoss Bitcoin Trust. It has been a long line of rejections ever since.
Firms like Fidelity, WisdomTree and VanEck have all seen their applications to launch such a product go nowhere. And Grayscale is currently suing the SEC to be allowed to convert its $15.9 billion Grayscale Bitcoin Trust into an ETF. The firm argues that the fund’s large discount would disappear if it could do so, benefiting its investors.
In October 2021, ProShares scored a major victory when the SEC approved its ProShares Bitcoin Strategy ETF (BITO), the first ETF to invest in bitcoin futures. For many investors, that was the next-best thing to a physical bitcoin ETF. The fund quickly accumulated $1 billion in assets under management over the course of a couple days. That said, nearly two years later, that amount has fallen to $823.2 million. The cryptocurrency currently trades well off the highs that it reached 2021.
The SEC has long maintained that cryptocurrencies could be subject to manipulation and that there are not enough protections for investors. SEC Chair Gary Gensler has been adamant that those issues must be addressed for the SEC to approve a physical bitcoin ETF. But BlackRock is the largest asset manager in the world and could mount a compelling campaign for approval.