How long until BlackRock debuts crypto ETF?
BlackRock is now partnering with a crypto exchange, has a bitcoin trust and a blockchain ETF
BlackRock has created a stir with a new partnership and product that offers clients access to bitcoin, but many are now questioning when its involvement in crypto will expand to ETFs.
Earlier this month, the world’s largest asset manager announced that it is partnering with crypto exchange Coinbase to offer institutional investors access to bitcoinwith BlackRock clients able to purchase the asset on its Aladdin platform.
Last Thursday, a blog post from the firm revealed the launch of its spot bitcoin trust for US institutional clients. Despite arriving without much fanfare from BlackRock itself, the new product marks its first step in packaging direct crypto exposure into a structured vehicle.
Interestingly, both announcements were accompanied by statements describing “substantial interest” in the asset class from BlackRock clients.
The firm’s chairman and CEO Larry Fink first revealed this client interest in his annual letter to shareholders in March, adding that his firm was “studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients.” .
Between the recent rise of crypto, client interest, other major asset managers launching packaged crypto products, and its status as the largest ETF issuer, many observers assume that an ETF or exchange-traded product (ETP) is next on BlackRock’s crypto journey.
Among them, Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said: “It may not be far off given that they are now committed. It seems like the next logical step.”
However, this is stated by a spokesperson for the company ETF Stream it has “no plans” to launch either a crypto ETP or ETF, and the company “has not submitted an application” for such a product.
BlackRock said: “It is worth adding that the Securities and Exchange Commission (SEC) has not yet approved an application for a spot bitcoin ETP.
“In general, any decision to launch iShares ETPs is based on a number of factors, including market and asset dynamics, regulatory considerations and client demand.”
Asset dynamics are a potential sticking point, given what some have described as the recent ‘crypto winter’ and the structural issues seen in stablecoin terra in May.
Michael O’Riordan, founder of Blackwater Search and Advisory, said: “I’m sure BlackRock would have [launched a crypto ETF/ETP] nine months ago it wasn’t for reputational and probably internal compliance concerns.”
Regulatory barriers such as the SEC’s reluctance to approve a spot bitcoin ETF — likely the route BlackRock would take — also limit how and where the firm will be able to launch its crypto offering.
In Europe, even diversified cryptocurrency products are packaged into the less favored exchange-traded note (ETN) structure, often called an ETP, rather than having UCITS ETF status.
“The ETF versus ETP wrapper issue is difficult as they require different platforms, at least in Europe now, so that will put some players off,” O’Riordan added.
Despite these challenges, other major asset managers have not been deterred from entering the space, with WisdomTree launching its bitcoin product in Europe in 2019 and Invesco, Fidelity and Global X all following suit in the past 12 months.
Although BlackRock has plans for packaged crypto products, the experience of other issuers tells us that bringing an institutional-grade crypto exposure to the market is no mean feat.
Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said ETF Stream last November that the firm had been working with the Invesco Physical Bitcoin ETP (BTIC) since mid-2018.
Buxton said: “Over the last two to three years, we’ve tried to structure a product that, from an institutional point of view, resembled as closely as possible a traditional ETF like our gold structure, and that’s been the driving force behind BTIC’s timeline.”
Anyway, this hasn’t been enough to quell the rumors, but even more major asset managers – including State Street Global Advisors (SSGA) and UBS Asset Management – may launch their own crypto ETPs.
BlackRock also already has some crypto-adjacent involvement in ETFs, having launched its iShares Blockchain and Tech ETF (IBLC) in the US in late April.
O’Riordan concluded that he believes it is only a matter of time before BlackRock launches a crypto ETP.
“I could have told you a year ago that BlackRock wants to do something in the space, but not just BlackRock, everybody wants to do it. It’s simply a space they can’t ignore.
“The question is in what format will they do it and what product. The market doesn’t need another spot bitcoin ETP.”
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