BlackRock Amends Bitcoin Deposits Amid ETF Concerns
Estimated Reading Time: 3 minutes
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 minutes to learn more
BlackRock has implemented a new mandate requiring Coinbase to deposit Bitcoin on-chain within 12 hours following a withdrawal request. This is to address growing concerns regarding the security of Bitcoin Exchange-traded Funds (ETFs).
The updated agreement with the Securities and Exchange Commission (SEC) is part of BlackRock and Coinbase’s ongoing partnership to manage the iShares Bitcoin. However, by setting an exact timetable for on-chain deposits, BlackRock hopes to increase reliability with institutional investors and dispel claims that Bitcoin ETFs are backed by actual Bitcoin assets.
This move comes after the rumors that some Bitcoin ETFs might not be backed by actual Bitcoin.
Addressing Investors’ Bitcoin Concerns
The concerns over the use of paper Bitcoin have struck the ETF market for some time. These have made critics argue that without clear evidence of on-chain deposits, some funds might be issuing BTC-backed securities without actually holding the underlying asset, thereby leading to price manipulation and liquidity issues.
The changes in operational practices indicate BlackRock’s commitment to maintaining investor confidence in the changing crypto environment.
The 12-hour on-chain deposit requirement by the firm can be seen as a direct response to these concerns. However, by ensuring that Bitcoin withdrawals are processed swiftly and transparently on the blockchain, the firm aims to provide investors with a higher level of certainty that their ETF shares are backed by real BTC.
Restoring Confidence in ETFs
In recent times, the cryptocurrency industry has witnessed increased concerns about institutional practices. Some investors are questioning the motives and practices of large financial firms entering the market, and the issue of paper BTC makes things even worse.
However, Bloomberg senior ETF analyst Eric Balchunas has refuted these claims. Affirming that BlackRock’s reputation and regulatory obligations would prevent any mishandling of BTC assets.
Similarly, Coinbase CEO Brian Armstrong stated that all mints and burns connected to its ETF products are settled on-chain within one business day, regardless of the method employed. This transparency means that the actual BTC backing the ETFs is available and accountable by regulatory requirements.
Finally, this step solves issues of openness and accountability in administering BTC-backed ETFs. Meanwhile, BlackRock’s standing as a crypto leader has become stronger.
In order to place winning trades with us via Bybit, you can open an account here.
