BlackRock’s Revision of Bitcoin Spot ETF Mechanism: Opening Doors for Wall Street Banks to Enter Crypto
A Game-Changing Move by BlackRock in the Crypto ETF Space
BlackRock, a global asset management giant, has recently made a significant modification to its proposed Bitcoin spot ETF mechanism. This move is poised to open the doors for Wall Street banks to participate in the cryptocurrency sector, which they have been restricted from due to regulatory constraints.
Further reading：BlackRock’s Big Move: Shifting $200 Million to IBTC, as Bitcoin Soars Over $44K
Revolutionizing the Bitcoin Spot ETF Mechanism
Previously, the mechanism for Bitcoin spot ETFs required the use of cryptocurrencies for the establishment of new fund shares. BlackRock’s latest revision anticipates allowing participants to use cash instead, which could revolutionize how these ETFs operate.
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Highly regulated U.S. banks currently cannot hold Bitcoin directly. BlackRock’s new setup could enable large financial institutions with substantial balance sheets, such as JPMorgan Chase and Goldman Sachs, to act as Authorized Participants (APs) for BlackRock’s ETF. However, it remains to be seen whether these banks will be willing to take on this role.
Cash Authorized Participants in the New ETF Model
According to a memo from a meeting on November 28 between the SEC, BlackRock, and Nasdaq, the cash used by Authorized Participants in this process can be converted into Bitcoin through an intermediary. The Bitcoin would then be stored by the ETF’s custodial service provider.
There is growing optimism in the market that Bitcoin spot ETFs may soon receive SEC approval, a development that could be a game-changer for the digital asset industry, potentially attracting substantial investments to such ETFs.
Further reading：Google Ads Eases Restrictions: A Preparatory Step for Bitcoin Spot ETFs by Allowing Crypto Trust Ads?
Expanding the Pool of Authorized Participants
Traditionally, it’s been thought that Authorized Participants should be large market makers with extensive experience in the crypto space, like Jane Street, Jump Trading, and Virtu, rather than banks. BlackRock’s latest adjustment implies that banks could also play a significant role and expand the pool of providers offering liquidity.
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Sui Chung, CEO of CF Benchmarks, commented on this potential shift: “If the SEC accepts this revised dual model of cash and physical creation and redemption, it means that the liquidity supporting the ETF shares will increase during trading, as clearly, there will be more potential Authorized Participants involved in the process.” He noted:
“While trading firms like Jane Street are large and professional, they are still far from the trillion-dollar scale of the balance sheets of major U.S. banks.”
Further reading：Bitcoin Spot ETFs Approach Critical Milestone: A Comprehensive Look at SEC Review Dates and Negotiations
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Keywords: BlackRock, Bitcoin Spot ETF, Wall Street Banks, Cryptocurrency, SEC, Authorized Participants, Asset Management, ETF Mechanism, Digital Assets, Crypto ETF, Liquidity Providers, Jane Street, Jump Trading, Virtu, JPMorgan Chase, Goldman Sachs, Market Optimism, Financial Innovation
