Citing unnamed sources, Business Insider’s Frank Chaparro reported today that Coinbase had contacted BlackRock for advice on how to go about creating a crypto ETF for retail investors. In July, we have reported on the existence of a crypto/blockchain working group within BlackRock, the New York-based investment giant who manages the popular iShares line of ETFs.
A crypto ETF would be a retail-friendly version of the Coinbase Index Fund, which the company launched in March and is made up of Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic. But its requirement that only accredited U.S. investors may participate with a minimum investment of $250,000 USD means that it has only a limited market. Which is why Coinbase, among many others, are seeking a crypto ETF that could be bought by a much larger investment pool.
Long Odds of Crypto ETF
Despite the report, the chances of getting such an ETF approved by the U.S. SEC have never looked worse. On August 22nd, SEC staff rejected nine applications for bitcoin ETF from ProShares, Direxion and GraniteShares, citing the proposals’ lack of protections for “fraudulent and manipulative acts and practices.”
Commissioners from the SEC are reviewing the decision, but if the fate of the Bats BZX bitcoin ETF supported by Cameron and Tyler Winklevoss is any example, the odds are not good. In July, the SEC commissioners confirmed the March rejection of a bitcoin ETF supported by Cameron and Tyler Winklevoss by a vote of 3-1.
However, that hasn’t stopped other firms from attempting to get approval for a crypto ETF. In July, Bitwise Asset Management filed with the SEC for a crypto ETF that would be an index of the 10 largest cryptocurrencies. In August, the SEC said it would be delaying a decision on another proposal from VanEck and SolidX until September 30th.