While Bitcoin ETF Approval Looms, Coinbase and BlackRock’s Crypto ETF Collaboration Heats Up
The concept of a Bitcoin ETF has been a major topic of interest for quite a while in the cryptocurrency industry. Even though enthusiasts have remained hopeful through all of this time, it’s been hard to stay encouraged with the denials, delays, and other problems.
So far, no additional reports have been published about the concept, but the lack of information has providing room in the community for analysts to try to fill in the gaps with their own predictions. For instance, a good number of analysts believe that the creation of a crypto ETF by the two companies would be the best chance for approval, as opposed to the applications. However, to make this prediction and figure out how viable it would be, understanding the current landscape is critical.
Only a few months ago in July, Bitcoin reached high prices that it hadn’t seen in month, garnering the believe that the SEC would support the Bitcoin ETF application from the Winklevoss’ twins. Their popularity alone should’ve been enough for that approval, but they were denied. Ultimately, BTC took a turn for the worse after. The SEC explained that their denial was based on concerns regarding fraud, manipulation, and a lack of sufficient surveillance-sharing agreements.
The excitement started building again in August, after the SEC decided to delay a decision on an ETF that was submitted by VanEck and SolidX until September. However, upon reaching the delayed date, the SEC decided to delay once more, which could be for up to six months.
This final delay was meant with a lot of shock from the community, but analysts found it to be a positive decision. In fact, they allege that the decision to delay could’ve easily been based on how supportive the community was for an approval. At the time, Gabor Gurbacs of VanEck tweeted:
“I am humbled and impressed by the public support of the VanEck-SolidX initiative to bring to market a well-constructed, liquid, physical, insured Bitcoin ETF. 1400+ comments, 99%+ in favor. The public has spoken! Bitcoin is compatible with the U.S. and global capital markets.”
This support behind an approval has seemed to grow with every denial and delay, as the community just wants to get something approved right now. That makes this the perfect time for Coinbase and BlackRock to work together on a crypto ETF, which they began to prepare in early September.
However, the news reports around that time all stated that the only actions happening were talks about a possible crypto ETF, and it still isn’t clear how dedicated either side is following through. There have yet to be comments from either side about the potentially budding projects.
Though unconfirmed, it is likely that a crypto fund would end up being an opportunity to track multiple cryptocurrencies at once, rather than solely Bitcoin. BlackRock has been looking into involving themselves with cryptocurrency for a while, and even created a working group for blockchain “to identify applications of blockchain-related technologies in financial services” for the last three years.
Still, without more information from either side, it’s hard to determine if they’d have a good chance of approval by the SEC. If their track records individually are any indication, it seems that a collaboration would bring together two very powerful entities. Coinbase would be able to utilize the government regulatory expertise of BlackRock, which would ultimately benefit the entire project. Joey King, a developer at Bitcoin.com, said,
“Coinbase is the industry veteran. If they are going with BlackRock, it’s because they know this has the best chance of approval.”
David Ambrogio, a consultant for Pelicoin, agreed, telling Finance Magnates that
“the crypto exchange has had discussions with BlackRock’s blockchain working group and expects to benefit from the latter’s expertise in launching exchange-traded products…. It also hopes to draw from BlackRock’s expertise as one of the largest asset management companies in the world.”
Nodari Kolmakhidze, the chief investment officer of Cindicator, commented that, ultimately,
“it could be one of the best fits for Coinbase, because having such a strong partner could provide the necessary business networking opportunities for Coinbase as well as adding liquidity to the ETF.”
Clearly, for some analysts, the venture into a crypto ETF between Coinbase and BlackRock is a way to engage the institutional investors of the world. Coinbase has been putting out multiple products for this type of investor, including a custodial service, venture capital, brokerage, and more.
However, projects like their index fund didn’t see the same success. In fact, when it was shut down, the cause was due to the lack of demand, even though it was created in March based on the “strong demand from institutional and high net worth individuals.”
Kolmakhidze added that the failure didn’t seem to ruin any of Coinbase’s plans, and it may end up leading the platform to their own alternative option. He said,
“They’ve launched Coinbase Bundle, a product for investors that simplifies the purchase of a basket of five cryptocurrencies. As with an ETF, this is basically an instrument that simplifies the investment and storage process for investors. Coinbase Custody, the institutional-grade custodian service by Coinbase, has also just obtained a license under New York State Banking Law to operate as an independent Qualified Custodian, which adds regulatory clarity.”
Right now, just like the ETFs submitted before them, it’s time to wait and see what happens.
Though the silence from Coinbase and BlackRock could be because of a lack of action, it could also be a strategic move to lay low until the VanEck/SolidX application has been approved or denied. As Kolmakhidze put it, “Time will tell.”