Institutional adoption has always been an important driver for growth in the crypto market. And while most institutions tend to join the industry when things are going well, the most opportunistic usually bide their time and wait for dips.
BlackRock, the world's largest asset management firm, is finally readying for a big move into the blockchain sector.
Entry of The Giant
In January, BlackRock made a surprise filing with the Securities and Exchange Commission (SEC), confirming plans to enter the blockchain with an exchange-traded fund (ETF).
The company confirmed that its product - the iShares Blockchain and Tech ETF - will invest in companies that use crypto and blockchain technology innovation across multiple fields.
If accepted, the ETF would be the first crypto-adjacent fund from BlackRock - a massive move proving once again that crypto and blockchain are officially mainstream and investors want to get their hands into this space.
So far, BlackRock hasn't shared the ticker and details for its planned ETF. But it is working closely with the SEC to ensure ETF approval before proceeding.
BlackRock boasted $9.4 trillion in assets under management as of the second quarter of 2021. The company made its name in the traditional finance space, CEO Larry Fink putting the company on the map in the aftermath of the 2008 financial crisis- coincidentally, the same crisis that led to the creation of cryptocurrencies.
Playing By The Rules
Despite its lengthy history, BlackRock has only recently started making inroads into the crypto and blockchain space. In December, Salim Ramji, the company's global head of ETFs, explained in an episode of Bloomberg's "Trillions" podcast that they were looking into launching a "thematic blockchain fund."
Speaking on how they plan to get through the SEC's strict ETF requirements, Ramji said they plan to follow the strictest liquidity and transparency standards for their blockchain ETF.
"As the regulatory environment becomes clearer, and as the underlying liquidity dynamics of that market become more to our satisfaction, that some of those dynamics will work in our favor," Ramji added.
With BlackRock's history in ETFs and other investment vehicles, there's no doubt they have the expertise to pull it off and get SEC approval.
Your Move, SEC
The ball is in the SEC's court. So far, SEC has made little progress in clarifying the rules on cryptocurrency ETFs, and its lack of action has deterred many companies from making plans.
Ramji told reporters in December 2021 that BlackRock won't be pushing for a crypto ETF until the SEC has clarified its stance on the products. At the time, Ramji said BlackRock would need additional clarity from the government before they design a crypto ETF.
"Before we wrap or put our brand on [crypto], we want to be certain that clients are going to be happy with us five years from now, ten years from now. The regulatory arena for cryptocurrencies is still incredibly opaque and not clear at all," Ramji asserted.
The latest company affected by the SEC's inaction is Grayscale Investments. The crypto industry's biggest asset manager has already been looking to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF. The Trust holds about $36 billion in assets, and Grayscale has been fighting to convert it since October 2021.
After submitting the first proposal, Grayscale's hopes were dashed when the SEC postponed its decision. Last week, the SEC once again delayed its decision to approve such a move.
In a release, the agency said it wasn't sure if Grayscale had designed its ETF proposal to prevent market manipulation and protect investors. The SEC invited public commentary on the issue, extending the approval window by 21 days.
Several other companies have made spot ETF proposals in the past year, but none have gone through. While Bitcoin futures ETFs are now at play, the market has shown that it wants a pure spot Bitcoin ETF and nothing less.
With BlackRock entering the market, there is the slightest glimmer of hope. But no one's being overly optimistic. After all, we've been here before.