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Why Are TradFi Giants BlackRock, Fidelity Applying for Bitcoin ETFs?

By Jinia07/03/2023


In the ever-evolving world of finance, BlackRock, the world’s largest asset manager, has made a significant move. 

On June 15th, the world’s largest asset manager filed for a bitcoin exchange-traded fund (ETF) with the SEC ( Securities and Exchange Commission) in a development that could potentially reshape the industry’s landscape. 

This raises two crucial questions: What does the BlackRock ETF mean for the world of cryptocurrency? And does this signal that traditional finance is finally ready to fully embrace the digital revolution?

Not Their First Rodeo

In the high-stakes rodeo of the financial world, BlackRock is no greenhorn. 

The world’s largest asset manager launched a spot Bitcoin private trust for institutional clients in the U.S. in August 2022. According to a blog post on their website, the private trust tracks the performance of bitcoin’s spot price in a move to offer institutional investors exposure to BTC’s price

In a quote at the time of the trust’s launch, the company said, “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients.”

As it seems, the growing interest in the world of digital assets has driven the move by BlackRock to go beyond its offering of a private Bitcoin trust to a Bitcoin spot ETF.

What is a Bitcoin Spot ETF?

A spot Exchange Traded Fund (ETF) is a type of investment fund and exchange-traded product that is designed to follow the price of an underlying asset, in this case, Bitcoin.

The term “spot” refers to the current market price, or the “spot price,” of the asset. So, a Bitcoin spot ETF would be designed to track the current, or “spot,” price of Bitcoin.

This is different from futures-based ETFs, which track the price of futures contracts rather than the spot price of the asset. Futures contracts are agreements to buy or sell an asset at a predetermined price at a specified time in the future.

In the case of a Bitcoin spot ETF, the fund would directly hold Bitcoin, and the performance of the ETF would be directly linked to the performance of Bitcoin itself. This allows investors to gain exposure to Bitcoin without having to buy and hold the cryptocurrency themselves.

What BlackRock’s Move Means for Crypto

BlackRock’s move to file for a Bitcoin spot ETF is a significant development in the crypto space, and it could have far-reaching implications for the regulatory landscape. 

Here are a few possible outcomes we can expect:

Increased Regulatory Scrutiny 

With a financial giant like BlackRock entering the crypto space, regulators might increase their scrutiny of the sector. This could lead to more stringent rules and regulations, which could impact the growth of smaller crypto companies. However, it could also lead to a more secure and stable crypto market, which could attract more institutional investors.

Legitimization of Cryptocurrency 

BlackRock’s move could be seen as a vote of confidence in cryptocurrency, potentially leading to its further legitimization. This could prompt regulators to develop more comprehensive and appropriate regulations that acknowledge the unique characteristics of cryptocurrencies rather than trying to fit them into existing regulatory frameworks.

Global Regulatory Standards

 As one of the world’s largest asset managers, BlackRock operates globally. Their move into crypto could push for the development of global regulatory standards for cryptocurrencies. This could help to reduce the current fragmentation of crypto regulations across different jurisdictions, making it easier for crypto businesses to operate internationally.

Increased Institutional Adoption 

If BlackRock’s Bitcoin spot ETF is approved, it could pave the way for other traditional financial institutions to launch similar products. Already, other asset managers, such as Fidelity, have renewed their push for Spot Bitcoin ETF. As others join in, this could lead to increased institutional adoption of cryptocurrencies and also increase pressure on regulators to expedite the development of a working framework for the crypto industry.

Potential for Regulatory Pushback 

On the flip side, there’s also a possibility that regulators might push back against BlackRock’s move, given the still volatile and somewhat controversial nature of cryptocurrencies. This could slow down the progress of institutional adoption of cryptocurrencies especially considering that the world’s biggest exchanges (Binance and Coinbase) are currently under the scrutiny of U.S. regulators. 

Conclusion: Has Crypto’s Time Finally Arrived?

Since 2017, the crypto space has seen tremendous growth, and the entrance of BlackRock into this arena is a testament to its potential. However, the road to widespread adoption and regulatory clarity is still a long one, and BlackRock’s move is just one piece of the puzzle.

As we move forward, it will be interesting to see how regulators respond to this development and what it means for the future of crypto.

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Jinia is a fintech writer focused on the cryptocurrency market and passionate about blockchain technology. With years of experience, she contributes to some of the most renowned crypto publications such as Cointelegraph, Coinmarketcap and others. She also has experience writing about the iGaming industry.

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