Analyzing the reasons, the timing, and the implications of financial giant’s foray into $BTC.
Can BlackRock really take on the SEC and change its anti-crypto stance?
It is becoming rather obvious that the crypto industry in the US will either make it or break it.
The SEC’s crusade against crypto exchanges was the last and the most powerful move from the Federal authorities, but last week presented an intriguing development on the crypto side.
A new player has introduced itself to the game, and this player is none other than BlackRock, world’s largest asset manager.
💰💰💰 With over $9.5 trillion of assets under management, BlackRock is a company of significant influence, to say the least. So significant, in fact, that very few world dominance conspiracy theories can go without it.
On Thursday evening, BlackRock filed for a spot Bitcoin ETF (exchange-traded fund), openly challenging the SEC, which has so far refused to approve such funds. What’s more, the filing names Coinbase (currently sued by the SEC) as the custodian.
The move comes at a time when many US investors are deciding to back out of crypto to avoid bringing upon themselves unnecessary attention from the SEC.
We believe that BlackRock’s Bitcoin ETF timing ⏰ can say a lot about the current state and the future outlook of the dollar and Bitcoin as its alternative (at least from the investors’ perspective).
This is what we’ll discuss in today’s newsletter, but first let’s see how BlackRock’s crypto stance has evolved throughout the years, why Bitcoin ETF is important, and whether BlackRock can take on the SEC.
Like many Wall Street executives, BlackRock’s CEO Larry Fink was at first skeptic about Bitcoin. However, in 2020 he admitted that “Bitcoin has caught the attention and the imagination of many people”.
It could be safe to assume that among those people there were a number of BlackRock’s clients, for in 2021, the asset manager filed to offer them a Bitcoin exposure via Bitcoin futures issued by the CME (Chicago Mercantile Exchange).
A year after, BlackRock said it partnered with Coinbase to offer direct access to Bitcoin to some of its institutional clients.
This brings us to June 15, 2023, when BlackRock filed for iShares Bitcoin Trust (iShares is the world’s biggest ETF specialist acquired by BlackRock in 2009). Although not technically an ETF, the trust is intended to function exactly as such, providing Bitcoin exposure to all types of clients, from conservative institutions to financial advisors or retail investors.
ETFs are investment vehicles that are easy to buy, sell, and record in the accounting books.
They spare investors the trouble of managing crypto custody while protecting them from potential accounting and legal complications that may arise when purchasing Bitcoin directly.
Strictly speaking, Bitcoin ETFs do not contribute to direct Bitcoin adoption, as the coins are held by a centralized entity. Moreover, in the case of BlackRock, they will coincidentally belong to one of the major representatives of the US financial power and a pillar of the capitalist system that so many bitcoiners oppose.
However, there’s no denying that a Bitcoin ETF commercialized by a giant like BlackRock will create more demand for the cryptocurrency. If accepted, it will also in a way legitimize Bitcoin, allowing American people and businesses to use it freely and Bitcoin ecosystem to develop.
But can it be approved?
It’s not an easy thing to refuse a company managing trillions of dollars. BlackRock’s roots run deep, and its influence extends far and wide.
Out of 576 BlackRock ETF filings, the SEC approved 575, which brings many to believe that Bitcoin spot ETF is almost inevitable. Incidentally, Bitcoin reacted to the news by surging 7%.
However, the outcome is far from being certain yet.
Since 2013, the SEC has been steadily refusing all spot ETFs: VanEck, WisdomTree, Bitwise, Ark Invest, 21Shares (twice), Grayscale… The latter has even filed a lawsuit against the SEC, claiming that the refusal was unlawful.
The SEC reasons wary: such ETF would be “prone to fraud”, it was “concerned about market manipulation”, some companies “failed to demonstrate their ability to protect the investors”…
Curiously enough, the SEC approved Bitcoin futures ETF – a product based on CME’s Bitcoin futures, which track Bitcoin index, which tracks Bitcoin price.
In other words, the SEC rejects the ETFs based on Bitcoin, but does not have a problem with a much more complex product, the basis of which (Bitcoin futures) even falls under the purview of another agency, the CFTC 🤦
This, of course, makes us wonder if investor protection is really at the center of the SEC’s agenda.
What’s more important, an increasing number of Senators and House representatives are wondering the same, taking an openly anti-SEC stance.
How many others will join if BlackRock opens its deep lobbying pockets, is unknown, but we foresee some epic battles on Capitol Hill in the near future ⚔️
BlackRock is a company that has the luxury of thinking strategically and long term.
If they file for an ETF now, it’s likely that the timing is right not only from the point of view of Bitcoin maturation and global macroeconomic situation. We would also argue that now that the SEC has shown its cards, the timing is also good to ensure its demise 🔫
The main reason for betting on Bitcoin, as we’d imagine it, is its unique nature of an independent currency.
As time goes on, every claim that Bitcoin has no value becomes less and less meaningful.
At the same time, bitcoiners’ warnings about the dangers of excessive money printing have all come true: inflation, rising rates, old bonds losing value leading to banking and debt crisis…
One could wonder why a bunch of laser-eyed people on Twitter warned about the upcoming inflation two years prior, while the head of the ECB denied it all the way until “inflation hit us suddenly”… but you probably already know the answer.
With the dollar’s decline, other currencies are coming forth, notably the yuan, which is already being used to secure international deals, like the one signed in March between Total Energies and China, with the settlement in renminbi.
However, the yuan is susceptible to the same problems as the dollar, and a true alternative lies only within a decentralized borderless and independent money.
How could BlackRock secure the acceptance of Bitcoin ETF?
Political pressure could be one such way, and now is definitely the time to act.
Politically, the SEC is not in the best position. It still has the support of some fierce anti-crypto Senators like Elizabeth Warren, but the pro-crypto camp is growing, and it is very vocal. Some, like McHenry and Thompson, propose to assign cryptoassets to the jurisdiction of the CFTC, others, like Davidson, call for firing Gary Gensler and restructuring the Commission.
BlackRock has the possibility of turning the tide and changing the ever more pronounced anti-crypto stance of the Biden administration.
Of course, nothing is carved in stone. The SEC could take over, populist politicians could use BlackRock’s involvement as a proof of Bitcoin’s elitist nature (yes, we know it’s the opposite of Bitcoin, but logic has never stopped politicians before), and any number of events could stifle Bitcoin and the larger crypto space in the US.
The odds, however, are in Bitcoin’s favor 😉