BlackRock is strengthening the security of Bitcoin ETF funds by requiring Coinbase to process BTC withdrawals within 12 hours, in response to investor concerns. Indeed, the world’s largest asset manager has filed an amendment for its Bitcoin exchange-traded fund (ETF). This follows widespread investor concerns about Coinbase’s on-chain settlement practices.
BlackRock has filed an amendment to require Bitcoin (BTC) withdrawals within 12 hours from the ETF’s custodian, Coinbase. According to BlackRock: “Subject to confirmation of the above minimum balance requirement, Coinbase Custody will process a withdrawal of digital assets from the custodial account to a public blockchain address within 12 hours of obtaining an instruction from the client or the client’s authorized representatives.”
BlackRock’s new amendment follows widespread industry concerns about Coinbase’s ETF custody practices. More and more investors are asking Coinbase to provide on-chain proof of Bitcoins purchased on behalf of cash ETFs. Coinbase is the custodian for 10 of the 11 Bitcoin spot ETFs and 8 of the 9 Ether ETFs recently approved in the United States.
Coinbase CEO Clarifies Investor Concerns
Despite new institutional flows from Bitcoin ETFs, BTC prices have stagnated over the past three months. This stagnation has fueled investor fears about the nature of Bitcoin reserves held by Coinbase, the potential custodian of many Bitcoin ETFs. Some have speculated that Coinbase may be holding “paper BTC,” i.e., Bitcoin IOUs rather than actual Bitcoins, thereby limiting upward pressure on the cryptocurrency’s price. However, all ETF transactions are ultimately settled on the blockchain. ETF addresses are not, however, shared publicly, according to Brian Armstrong, co-founder and CEO of Coinbase.
In response to investor concerns, Armstrong wrote in a September 14 X post, “If you want audits, Deloitte audits us every year, we’re a public company. I doubt our institutional clients want people dusting off all their addresses, and it’s not our job to share for them. This is what it looks like if you want a bunch of institutional money flowing into Bitcoin.”
Investor concerns began to intensify in August, after Coinbase announced the development of a new Wrapped Bitcoin (wBTC), called Coinbase BTC (cbBTC).
BlackRock and Bitcoin ETFs Are Not the Cause of BTC’s Price Fall
Since their launch in January, the ETFs have accumulated over $59.2 billion in cumulative assets. BlackRock’s IBIT remains the largest Bitcoin ETF. This corresponds to a market share of over 38% and more than $22.5 billion in on-chain assets.
According to Eric Balchunas, Senior ETF Analyst at Bloomberg, ETFs are not to blame for the recent fall in the Bitcoin price caused by native Bitcoin holders, despite mounting accusations to the contrary. The analyst mentions in a September 15 X post:
“I understand why these theories exist and why people want to scapegoat ETFs. It is, after all, unthinkable that HODLers are the sellers. All ETFs and BlackRock have done is to save the BTC price from the abyss on several occasions.”
By February 15, ETFs accounted for around 75% of new investments in Bitcoin. The latter had passed the $50,000 mark.
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