- BlackRock, the world’s largest asset manager, is challenging the SEC’s distinction between spot and futures crypto ETFs.
- BlackRock argues that the regulatory treatments for spot market Bitcoin and Ethereum ETFs should be consistent with those for futures ETFs.
BlackRock, the largest asset management firm globally with over $8 trillion in assets under management, is taking a bold stance against the U.S. Securities and Exchange Commission (SEC). The firm asserts that there is no fundamental difference between spot market Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) and their futures counterparts.
Challenging the Regulatory Framework
In a recent filing, BlackRock contends that the SEC’s refusal to approve spot market crypto ETFs, despite greenlighting futures ETFs, is an unjustified regulatory discrepancy. The investment titan emphasizes that since ETH futures are priced based on the underlying spot ETH market, it is only logical for the SEC to also approve ETFs that offer direct exposure to spot ETH.
The argument hinges on the application of the Investment Company Act of 1940, which BlackRock believes is being misapplied to spot ETFs. The firm argues that the added investor protections provided by the 1940 Act do not extend to addressing potential harms arising from the underlying assets or markets of the assets held by ETFs, such as fraud or manipulation risks. This is crucial because these risks are inherent in both ETH futures and spot ETH markets.
The Case for Equal Treatment
BlackRock’s contention is that the SEC’s differentiation between futures ETFs registered under the 1940 Act and spot ETH ETPs (exchange-traded products) registered under the 1933 Act lacks substantive justification. They argue that the restrictions and protections laid out in the 1940 Act do not specifically address the nature of an ETF’s underlying assets, be it ETH futures or spot ETH, or the origins of their pricing, whether it be the CME ETH futures market or spot ETH markets.
In light of these arguments, BlackRock concludes that the SEC’s distinction between the two types of ETFs is arbitrary and calls for a reassessment of the regulatory approach towards spot market crypto ETFs. This challenge comes at a time when BlackRock has been increasing its involvement in the cryptocurrency space, recently registering its iShares Ethereum trust in Delaware, a move that mirrors its earlier registration of a Bitcoin trust.
The firm’s stance is a significant development in the ongoing dialogue about the regulatory treatment of crypto ETFs. It highlights the growing demand for regulatory clarity and parity in the rapidly evolving world of digital assets, where traditional financial frameworks are continuously being tested and reevaluated.