Coinbase Tries to Court BlackRock to Explore Crypto ETF

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Coinbase Tries to Court BlackRock to Explore Crypto ETF

The US Securities and Exchange Commission’s (SEC) repeated rejections of Bitcoin-based exchange-traded funds (ETFs) are not deterring prospective enterprises from releasing the long-awaited cryptocurrency product. According to a September 8 Business Insider (BI) report, leading bitcoin exchange operator Coinbase has emerged as the newest competitor in the race to develop a cryptocurrency ETF, and is still looking to collaborate with one of the world’s top asset managers, BlackRock Inc. (BLK).

CoinbaseExtends Crypto Product Offerings

According to people familiar with the matter, the proposed crypto ETF is yet another attempt by Coinbase to diversify its products and offerings, as the exchange continues to add new flavors to its already diverse business, which currently spans asset management, venture capital, trading, custody, and brokerage. The cryptocurrency exchange has met with BlackRock’s blockchain working group and intends to gain from the latter’s experience in developing exchange-traded products. BlackRock’s blockchain working group was established in 2015 “to find uses of blockchain-related technology in financial services.”

The U.S. CEO of iShares, BlackRock’s ETF subsidiary, cast doubt on the fund sponsor’s backing of bitcoin assets for exchange-traded funds the day before the BI story. “Assets with protections and markets that support long-term holdings are table stakes for iShares funds. Crypto assets are still ineligible for iShares ETFs “On September 7, Martin Small, a managing director at BlackRock, tweeted.

While there have been reports regarding BlackRock’s fluctuating interest in cryptocurrencies, no real moves have been taken. In July, its chief multi-asset strategist Isabelle Mateos y Lago stated that while the company is keeping an eye on cryptocurrency, it does not see it as an investable asset, and earlier in March, the company’s global chief investment strategist Richard Turnill stated that “Cryptocurrency investing is only for those who can bear 100% losses.” (Also see BlackRock Rips Bitcoin: Buy Crypto Only If You’re Prepared for ‘Complete Losses.’)

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A growing number of institutional financial organizations, including Goldman Sachs, Citigroup, Fidelity, JP Morgan, and NYSE-parent ICE, have declared intentions to introduce cryptocurrency trading services. They provide anything from custodial services to digital asset-based crypto holdings to crypto trading platforms. In the expanding crypto environment, an ETF seems to be the obvious asset to be added to the list. However, the SEC has kept all Bitcoin ETF supporters waiting. It has consistently rejected multiple Bitcoin ETF proposals, citing the possibility of fraud and the necessity for investor safety. (For more, see SEC Rejects a New Wave of Bitcoin ETFs.)

Coinbase joins the ranks of several other cryptocurrency businesses, including the Winklevoss twins-led Gemini exchange, Bitwise Asset Management, and VanEck, that are seeking SEC approval for their various ETFs.

Coinbase revealed intentions for a cryptocurrency-based index fund in March, and the Coinbase Index Fund was launched in June. While the index fund is intended at accredited investors and permits assets ranging from $250,000 to $20 million, the new ETF is aimed at ordinary retail investors and may accept smaller stakes. If the ETF becomes a reality, it may be based on a basket of cryptocurrencies rather than a single virtual currency. (Also see Coinbase Launches Index Fund for Large Investments.)

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and neither Investopedia nor the author suggest that you do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns no cryptocurrencies as of the day this post was published.

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