December 5, 2023 at 11:17 GMTModified date: December 5, 2023 at 11:17 GMT
December 5, 2023 at 11:17 GMT

BlackRock and SEC iron things out in amended Bitcoin ETF filing

Asset management giant BlackRock has intensified its efforts for a spot Bitcoin exchange-traded fund (ETF), filing for an updated ‘iShares Bitcoin Trust’.

BlackRock and SEC iron things out in amended Bitcoin ETF filing

Asset management giant BlackRock has intensified its efforts for a spot Bitcoin exchange-traded fund (ETF), filing for an updated ‘iShares Bitcoin Trust’. It also revealed receiving $100,000 as ‘seed capital’ for its proposed ETF.

Crypto index fund manager Bitwise also joined in amending its S-1 filings for a similar ETF with the SEC. The amendments mostly centre around enhanced compliance measures, including anti-money laundering protocols and a thorough KYC process.

The development demonstrated the US Securities and Exchange Commission (SEC)’s openness to discussions with issuers in ironing out things before it decides on the applications. Bloomberg Intelligence’s James Seyffart interpreted this as a sign of active engagement between the parties.

What’s new with BlackRock’s ETF filing?

The new provisions in the updated version of BlackRock’s ETF filing included measures that would be taken by the trust administrator to monitor unusual price movements. 

There was also the inclusion of the language about ensuring compliance with anti-money laundering regulations. An audited statement from PricewaterhouseCoopers was also part of the new additions. 

The changes illustrated the efforts taken by the asset manager to align its ETF in accordance with the regulatory instructions given by the SEC. There has been emphasis on interactions with thoroughly vetted third-party service providers, incorporating robust Know Your Customer (KYC) processes. This involved key entities, as stated in the filing:

“The Sponsor and the Trust will only interact with known third-party service providers with respect to whom the Sponsor or its affiliates have engaged in a due diligence process to ensure a thorough KYC process, such as the Authorised Participants, Market Makers, Prime Broker and Bitcoin Custodian.” 

The $100K seeding

The updated filing also showed that BlackRock had seeded the ETF in question back in October this year. In a fresh application with the SEC, the investment giant disclosed receiving $100,000 as “seed capital” from an unknown investor. 

The filing noted: “The seed capital investor agreed to purchase $100,000 in shares on October 27, 2023, and on October 27, 2023 took delivery of 4,000 shares at a per-share price of $25.00 (the “seed shares”).”

BlackRock stated that the ‘Seed Capital Investor’ played a significant role in the initial funding of the Trust. This capital represented the initial funding that would allow the Bitcoin ETF to fund the creation units underlying the ETF so that shares can be offered and traded in the open market.

The total proceeds to the Trust from this sale were $100,000. The delivery of these seed shares was completed on the same day. It was later redeemed for cash, and the seed investor proceeded to purchase the Seed Creation Baskets. 

However, the document did not specify the exact number of shares or the per-share price for these Seed Creation Baskets. While the total proceeds to the Trust from the sale of the Seed Creation Baskets were mentioned in terms of Bitcoin, the exact amount was also not specified in the filing. 

Many in the queue

BlackRock’s proposed “iShares Bitcoin Trust” aims to track the price of Bitcoin, offering investors exposure to the top cryptocurrency by giving traditional investment access to $BTC.

However, it is not the only issuer aiming to release a Bitcoin ETF. Currently, there are about 12 other potential contenders who are waiting for a greenlight on their application from the US regulatory watchdog. 

Other proposals are from major players in the industry like Ark Invest, Bitwise, VanEck, and Fidelity. In the past, the SEC has rejected many Bitcoin ETF applications over concerns about market manipulation.

Nevertheless, there has been a continued market anticipation for the approval of a Bitcoin spot ETF in the US recently. Bloomberg ETF analysts have also maintained their predictions of a 90% ETF approval probability for early next year. 

Just last week, Bloomberg ETF analyst, James Seyffart, predicted that an approval would come in early January: “Okay the window for potential spot Bitcoin ETF approval is looking like it’s gonna be between Jan 5 & Jan 10 2024.”