BlackRock’s Argument for Equal Treatment of Spot Crypto ETFs

BlackRock, the world’s largest asset manager with $9.42 trillion in assets under management, has made a compelling case to the U.S. Securities and Exchange Commission (SEC) for the approval of spot crypto exchange-traded funds (ETFs). Their argument hinges on the precedent set by the SEC’s previous approval of ETFs featuring crypto futures. BlackRock’s application emphasizes that since these futures ETFs are priced based on the underlying spot market (like Ethereum), it logically follows that spot crypto ETFs should also be approved.

The SEC’s Delay and the Potential Impact of Approval

While the SEC has been hesitant to approve these funds, which offer indirect exposure to crypto assets such as Ethereum and Bitcoin, industry analysts are optimistic about an imminent approval. This anticipated green light is expected to usher in significant capital inflows into the bitcoin and crypto markets. However, the SEC has traditionally viewed crypto futures ETFs differently from spot crypto ETFs, citing distinct regulatory frameworks under the 1940 and 1933 Acts. BlackRock counters this by arguing that these legal distinctions do not materially impact the nature of the underlying assets, whether they be ETH futures or spot ETH.

Industry Expectations and Competition for Approval

Top ETF analysts like James Seyffart and Eric Balchunas from Bloomberg are predicting a high likelihood of SEC approval for a fund before January 2023. Meanwhile, Steven Schoenfield, a former BlackRock managing director, suggests that SEC approval for BlackRock’s spot bitcoin ETF application could funnel an additional $200 billion into bitcoin markets. Schoenfield also points out that the SEC is likely to approve multiple applications simultaneously to avoid giving any single entity a first-mover advantage. This scenario sets the stage for intense competition among firms, including those more deeply embedded in the crypto ecosystem than BlackRock, as they vie for a share of the burgeoning digital assets market.

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SOURCE: BlackRock tells SEC it ‘must’ approve spot crypto ETFs given precedent – TheStreet Crypto: Bitcoin and cryptocurrency news, advice, analysis and more