US-based crypto exchange, Coinbase, has used its immense clout and massive influence on the trading circuits to rope in the biggest US-based hedge fund and capital fund manager – BlackRock in a blockbuster deal to launch an ETF (Exchange-Traded Fund).
In fiat-currency, ETFs are the most popular investment options and many players in this virtual asset sphere have been attempting to bring these flexi-profit making instruments to the cryptosphere. All previous attempts, one by the Winklevoss’ Twins-backed ETF, and a second by Van Eck Associates Corp, SolidX Management LLC, and Bitwise Asset Management Inc were denied by the SEC back in July, 2018.
Industry observers such as Cindicator’s Chief Investment Officer Nodari Komkakhidze says:
“The ETF could be one of the best fits for Coinbase because having such a strong partner could provide the necessary business networking opportunities for Coinbase as well as adding liquidity to the ETF.”
BlackRock is a major influencer of the S asset management industry and has been positioning itself as a ‘green’ evangelist with an eye for tomorrow’s sustainable technologies including a blockchain working group for enhancing financial services spectrum. In this backdrop, the massive funds that the institutional investor manages at roughly $6 trillion in assets could well be the agent which will influence the SEC into approving the Coinbase-BlackRock-backed ETF, for the very first time in the history of decentralized technology currencies.
SEC refused the game-changing ETF product
For several months into 2018, Bitcoin ETF was the ‘golden’ phrase that was the undying pulse of the crypto industry, especially in the USA. There were a zillion expectations, and aspirations awaiting the approval of the US Securities Exchange Commission (SEC) to offer a Bitcoin-specific ETF, and David Ambrogio, a Pelicoin consultant says:
“the crypto exchange has had discussions with BlackRock’s blockchain working group and expects to benefit from the latter’s expertise in launching exchange-traded products…. It also hopes to draw from BlackRock’s expertise as one of the largest asset management companies in the world.”
Tapping Institutional investor spectrum
One of the key reasons for the ETF venture by any of the crypto-based players is that it will allow the big-time funding companies, capital investment companies, and hedge funds to invest in yet-volatile cryptocurrencies. However, the SEC continues to view these non-fiats with a jaundiced-eye since their inquiry reports reveal that exchanges- will not provide security with respect to their assets, and money laundering was a dominating issue in these transaction systems.
In the meanwhile, Coinbase itself has not been very successful with its institutional investing forays such as the Index Fund it offered in March but was closed earlier in October, due to lack of investors or insufficient demand.
Kolmakhidze has gone on record to indicate such failures may not be a deterrent to coinbase and in fact could actually inspire the influential-exchange into developing a product which could work on the lines of an alternative crypto ETF, called the Coinbase Bundle, offering a set of 5 cryptocurrencies.
Besides Coinbase Custody has received a license under the New York State Banking Law to offer unique Qualified Custodian services, which does set up the exchange to initiate and offer its own unique products and services. However, it does require BlackRock in the background if it needs to offer big-ticket services such as ETFs since the most conservative funding estimates indicate upwards of $6 trillion.