BlackRock’s Coinbase Custody Raises Questions Ahead of Spot-Bitcoin ETF Decision: A Turning Point in the SEC Lawsuit?

• Global asset manager BlackRock has lodged an application for a spot-Bitcoin ETF, naming Coinbase as its custodian.
• This unexpected move occurs amidst increased regulatory actions in the US crypto market, potentially signalling a paradigm shift in the industry.

In the midst of heightened regulatory tension in the US, BlackRock, a leading global financial institution, has taken the crypto market by surprise. The firm has submitted an application for a spot-Bitcoin Exchange Traded Fund (ETF), an intriguing development given the current regulatory climate.

More notable is BlackRock’s decision to nominate Coinbase, a company recently implicated in a lawsuit by the US Securities and Exchange Commission (SEC) over alleged custody rules violations, as the custodial service provider for their proposed ETF. An SEC approval of BlackRock’s application could suggest a swift resolution to the ongoing lawsuit.

Crypto industry experts have given their perspectives on this unexpected turn of events. WhaleWire, a respected crypto analyst, raises doubts about the approval of BlackRock’s ETF due to Coinbase’s ongoing conflict with the SEC. Meanwhile, market expert Will Clemente describes the situation as “Hilarious”, considering the SEC’s previous approval of Coinbase’s IPO in 2021, followed by a lawsuit against the same.

Insiders speculate that if the SEC greenlights BlackRock’s application, it might be seen as a blatant favouritism towards larger players. This potential bias could potentially force Grayscale Investments, another key player striving to convert its Bitcoin Trust into a spot Bitcoin ETF, to pursue legal action against the SEC.

On another front, BlackRock and Coinbase have announced a partnership to connect institutional clients of Aladdin, BlackRock’s comprehensive investment management platform, with the crypto market. Through the collaboration, Coinbase Prime will facilitate crypto trading, custody, brokerage, and reporting capabilities to Aladdin’s institutional client base.

Coinbase has established itself as a pivotal force in the crypto economy, offering a comprehensive suite of services including trading, custody, and staking infrastructure to a diverse clientele. This partnership signifies BlackRock’s belief in Coinbase’s capabilities and their shared ambition to propel institutional adoption of crypto.

As the world’s largest asset manager, BlackRock’s move into the crypto market signifies a pivotal shift, acknowledging Bitcoin’s potential as a viable asset class. This development could serve as a gateway for unprecedented investor participation in the Bitcoin market through a regulated and accessible ETF, if approved by the SEC.