Digital Goldrush Is on After BlackRock’s Bitcoin ETF Move

BlackRock Inc.’s filing last week to launch a spot bitcoin exchange-traded fund in the U.S. has opened the floodgates for firms wanting to issue their own version of an investment that, for now, remains illegal. 

Invesco Ltd., WisdomTree Inc. and Bitwise Asset Management all filed with the Securities and Exchange Commission to launch spot bitcoin ETFs after BlackRock filed to do so last Thursday.  

Companies including WisdomTree and VanEck sought to launch spot bitcoin ETFs in the past, but the SEC has repeatedly refused to allow them. In perhaps the most high-profile case, Grayscale Investments has sued the SEC after the regulator denied the crypto investment firm’s effort to convert its bitcoin trust into a U.S.-listed spot bitcoin ETF.  

While permitted by European and Canadian regulators, the SEC has denied crypto ETFs on the basis that the industry is too lightly monitored and vulnerable to fraud.  

Current bitcoin ETFs, such as the ProShares Bitcoin Strategy ETF (BITO), usually invest in futures to gain exposure to the digital currency. A spot bitcoin ETF would own bitcoin outright, and in the case of the BlackRock proposal, the currencies would be stored by a third party such as Coinbase Global Inc. 

Potential Game-Changer 

“This looks like a game of ‘follow the leader’ after BlackRock’s filing last Thursday,” The ETF Store President Nate Geraci told etf.com in an email. “BlackRock throwing their hat into the ring for a spot bitcoin ETF at a time when there’s an extremely hawkish regulatory backdrop in crypto is clearly turning heads. That could be a game-changer.” 

Securities lawyer Aisha Hunt agreed that the latest wave of filings appears to be a sign that companies don’t want to be left out if BlackRock’s approval gets a green light. Still, she urged caution. 

“There’s no indication that the SEC has changed their position on greenlighting a spot Bitcoin ETF any time soon,” Hunt, whose firm Kelley Hunt & Charles is based in Houston, told etf.com in an email. “It comes down to a surveillance sharing agreement with a spot bitcoin market of significant size.”  

Such an agreement would mean a crypto exchange would share information about trading activity with a regulated securities exchange. Currently, none of the major crypto exchanges, such as Coinbase, has such an agreement or is registered as a securities exchange themselves. 

Investor Cameron Winklevoss, who with his twin brother Tyler first sought to create a bitcoin ETF a decade ago, tweeted that the BlackRock filing signals that “the Great Accumulation of bitcoin has begun.” 

“If bitcoin was the most obvious and best investment of the previous decade, this will likely be the most obvious and best trade of this decade,” he wrote. 

etf.com parent company ETFS Capital owns 10.2% of WisdomTree’s outstanding stock. The U.K. company has nominated a slate of candidates for WisdomTree’s board of directors.  

Contact Gabe Alpert at [email protected]