BlackRock, the world’s largest asset manager, has filed an amendment to its Bitcoin exchange-traded fund (ETF) proposal, demanding that Coinbase, the ETF’s custodian, process Bitcoin withdrawals within 12 hours. This move comes in response to growing investor concerns about Coinbase’s onchain settlement practices for Bitcoin ETFs.
Investor Concerns Over Coinbase’s Custodial Practices
Despite the recent surge in institutional inflows into Bitcoin ETFs, the price of Bitcoin has remained relatively stagnant. This has led to speculation that Coinbase might be buying “paper BTC,” or Bitcoin IOUs, on behalf of ETF issuers, rather than settling transactions directly on the blockchain.
However, Coinbase CEO Brian Armstrong has clarified that all ETF transactions are ultimately settled onchain, although the company does not publicly share all ETF addresses. He has emphasized that sharing these addresses could pose privacy risks for institutional clients and could discourage them from investing in Bitcoin ETFs.
BlackRock’s Amendment
BlackRock’s amendment aims to address investor concerns by requiring Coinbase to process Bitcoin withdrawals within 12 hours of receiving an instruction from the ETF or its authorized representatives. This would provide greater transparency and assurance to investors that their funds are being held and settled on the Bitcoin blockchain.
The Role of ETFs in Bitcoin’s Price
While some investors have blamed Bitcoin ETFs for the recent price slump, analysts argue that the ETFs have actually helped to support Bitcoin’s price. Eric Balchunas, a senior ETF analyst at Bloomberg, has stated that ETFs have repeatedly saved Bitcoin’s price from the abyss by attracting significant institutional investment.
Also Read: BlackRock’s IBIT Breaks Inflow Drought, But Spot Bitcoin ETF Volumes Cool
As of February 15, ETFs accounted for approximately 75% of new investment in Bitcoin, contributing to the asset’s price surge above $50,000.
BlackRock’s demand for stricter withdrawal terms from Coinbase highlights the growing importance of transparency and accountability in the Bitcoin ETF market. While Coinbase has maintained that all ETF transactions are settled onchain, the amendment seeks to provide additional safeguards for investors.
As the Bitcoin ETF market continues to evolve, it is likely that we will see further scrutiny of custodial practices and a push for greater transparency from both ETF issuers and custodians.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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