BlackRock Refiles for Bitcoin ETF After SEC Flags Flaws

BlackRock has submitted an amended application for an exchange traded fund that would focus on Bitcoin spot markets after the regulators expressed misgivings about its first attempt. 

In a new filing submitted on its behalf by the Nasdaq exchange, BlackRock said that it will be finalizing a surveillance agreement with Coinbase (COIN), addressing one of the main objections the Securities and Exchange Commission has raised when rejecting applications for Bitcoin spot ETFs in the past. 

“The Spot BTC SSA is expected to be a bilateral surveillance-sharing agreement between Nasdaq and Coinbase that is intended to supplement the Exchange’s market surveillance program,” read the filing.

The proposed ETF will rely on Coinbase, the largest crypto exchange in the United States, as its custodian and for its spot market data for pricing. Coinbase also has an agreement to provide similar services to Fidelity, which is seeking its own Bitcoin spot ETF.

Bitcoin prices surged after news broke that BlackRock—the world’s largest asset manager with $9.5 trillion under management in the first quarter of 2023—was filing for the ETF. Since the filing was first reported on June 15, Bitcoin’s price has risen by about 20%, especially as more firms piled in on submitting their own ETF filings.

This bullishness was strong enough that the markets shrugged off a June 30 report in the Wall Street Journal that the SEC found BlackRock’s application to be inadequate. 

The warning shot did not take long to resonate across the industry, with exchange operator Cboe quickly modifying its application for a spot ETF on behalf of Fidelity the same day as the WSJ report. 

Registering a Bitcoin ETF with the SEC has been a difficult task, especially for funds dealing with spot market trading. To date, not a single application for such a spot ETF has been approved by the SEC due to concerns about potential fraud or manipulation in the spot market. By contrast, the SEC has approved four Bitcoin ETFs for futures trading.

An ETF is a type of investment product tied to commodities, currencies, stocks, or bonds. It allows investors to have skin in the game without actually owning a particular asset. A Bitcoin ETF allows investors to invest in the world’s oldest and largest cryptocurrency without having to hold it themselves—rather, they just buy shares that track the asset’s price.