In a strategic move, BlackRock has adjusted the mechanics of its proposed spot bitcoin ETFs, allowing authorized participants (APs) to create new fund shares with cash instead of solely relying on cryptocurrency. This alteration paves the way for highly regulated U.S. banks, such as JPMorgan or Goldman Sachs, which face restrictions in holding cryptocurrencies, to play a pivotal role as APs in BlackRock’s ETF ecosystem.
The process involves banks using cash, a resource they can handle, to create new fund shares. Subsequently, an intermediary can convert this cash into bitcoin, and the acquired cryptocurrency can be stored by the ETF’s custody provider. This transformative adjustment, disclosed in a memo filing related to a meeting involving BlackRock, the U.S. Securities and Exchange Commission, and Nasdaq on November 28, signifies a significant shift in the potential composition of APs.
The financial industry is closely watching as optimism grows regarding the approval of spot bitcoin ETFs by the SEC. If approved, it could reshape the digital assets industry, attracting a surge of investment from retail investors. Traditionally, market-making firms with crypto experience were expected to serve as APs, but this adjustment broadens the scope to include major banks, potentially diversifying the ranks of liquidity providers in the market.