The world’s largest asset manager has filed for an amendment for its Bitcoin exchange-traded fund (ETF) following widespread investor concerns over Coinbase’s onchain settlement practices.
BlackRock has filed an amendment to require Bitcoin (BTC) withdrawals within 12 hours from the ETF’s custodian, Coinbase, according to a Sept. 16 filing with the United States Securities and Exchange Commission.
BlackRock wrote in the filing:
“Subject to confirmation of the foregoing required minimum balance, Coinbase Custody shall process a withdrawal of Digital Assets from the Custodial Account to a public blockchain address within 12 hours of obtaining an Instruction from Client or Client’s Authorized Representatives.”
BlackRock ETF amendment. Source: sec.gov
BlackRock’s new amendment follows widespread industry concerns about Coinbase’s ETF custodial practices. Increasingly, investors have been asking Coinbase to provide onchain proof of the Bitcoin bought on behalf of the spot ETFs.
Coinbase is the custodian for 10 out of 11 spot Bitcoin ETFs and eight out of the nine recently approved Ether (ETH) ETFs in the US.
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Coinbase CEO clarifies investor concerns over Coinbase’s Bitcoin ETF custody practices
Despite the newfound institutional inflows from the Bitcoin ETFs, BTC prices have been stagnating for the past three months.
This is partly what prompted widespread investor concerns that Coinbase was buying “paper BTC,” or Bitcoin IOUs, on behalf of Bitcoin ETF issuers, hence suppressing Bitcoin price.
However, all ETF transactions are ultimately settled onchain, despite not publicly sharing all ETF addresses, according to Brian Armstrong, co-founder and CEO of Coinbase.
In response to investor concerns, Armstrong wrote in a Sept. 14 X post:
“If you want audits, Deloitte audits us annually, we’re a public company. I doubt our institutional clients want people dusting all their addresses, and it’s not our place to share for them. This is what it looks like if you want a bunch of institutional money to flow into Bitcoin.”
Source: Brian Armstrong
Investor concerns started intensifying in August after Coinbase first teased the development of a new Wrapped Bitcoin (wBTC), called Coinbase BTC (cbBTC).
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BlackRock and Bitcoin ETFs aren’t the cause of the BTC price slump: Analyst
Since their launch in January, the ETFs have amassed over $59.2 billion worth of cumulative onchain holdings, according to Dune data.
BlackRock’s IBIT remains the largest Bitcoin ETF, with an over 38% market share and over $22.5 billion worth of onchain holdings.
Bitcoin ETF issuers. Source: Dune
Despite the increasing accusations, ETFs weren’t the reason behind Bitcoin’s recent price slump caused by native Bitcoin holders, according to Eric Balchunas, senior ETF analyst at Bloomberg.
The analyst wrote in a Sept. 15 X post:
“I get why these theories exist and ppl want to scapegoat the ETFs. Bc it is too unthinkable that the native HODLers could be the sellers. But they are… All the ETFs and BlackRock have done is save BTC’s price from the abyss repeatedly.”
By Feb. 15, ETFs accounted for about 75% of new investment in Bitcoin, which had surpassed the $50,000 mark.
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