BlackRock Bitcoin ETF Now Inviting Participation From Wall Street Banks

Changes to the proposed spot bitcoin ETF structure would allow authorized participants (APs) to create new shares in the fund with cash, rather than just with cryptocurrency, essentially opening the door to banks that cannot own crypto directly.

Changes to BlackRock's proposed bitcoin (BTC) spot ETF mechanism open the door for Wall Street banks, which face restrictions on holding the cryptocurrency, to play a key role.

BlackRock recently made it an official participant – a key part of the ETF ecosystem – will be able to create new stock funds with cash, not just with cryptocurrency.

Since highly regulated US banks cannot hold bitcoin themselves, this arrangement would allow firms like JPMorgan or Goldman Sachs – companies with some of the largest balance sheets in the world – to act as APs for BlackRock's ETFs. (Whether they want to or not is another matter.)

AP cash used in this process can then be exchanged for bitcoin by intermediaries and held by ETF custody providers, according to a memo filing related to a Nov. 28 meeting involving the U.S. Securities and Exchange Commission, BlackRock and Nasdaq.

Optimism has grown that a spot bitcoin ETF will soon be approved by the SEC, which would be a game changer for the digital asset industry if it attracts a lot of money from retail investors. The commonly held view to date is that AP is a large market making firm with experience in the crypto space, like Jane Street, Jump Trading and Virtu – not a bank. But these changes mean banks can take further action and expand the reach of liquidity providers.