How Will the SEC Rule on BlackRock and other Spot Bitcoin ETFs?

BlackRock, the world’s largest asset manager, is leading the campaign for regulatory approval of the spot Bitcoin ETF. The firm is taking advantage of a marked shift in sentiment and a sense that the views of regulators are more or less aligned with its own.

That’s the view of Martin Bednall, a BlackRock veteran, who spoke on a panel at the 2023 CCData Digital Asset Summit in London on Tuesday.

BlackRock Has Come Around on Bitcoin, Former Exec Believes

Bednall, a BlackRock managing director in London from 2000 to 2013, is now CEO of Jacobi Asset Management, which launched the first spot Bitcoin ETF in Europe in September. It is now listed on Euronext Amsterdam.

During the Tuesday panel discussion, he described a shift in sentiment in the asset management market. And, specifically, on the part of his former firm.

In past years, BlackRock’s current CEO Larry Fink was not a believer in cryptocurrency, Bednall said. Rather, Fink shared the view, still common in some quarters, that crypto was shady and a tool for money laundering.

But that is no longer Fink’s view, or the market’s, Bednall argued. Bednall described a long evolution of BlackRock’s views on the role of Bitcoin and the spot Bitcoin ETF specifically.

Thanks partly to the outcome of high-profile legal battles in the United States, BlackRock has come to view the product much more favorably, he said. Bednall and others on the panel referred to Ripple’s victory over the Securities and Exchange Commission (SEC) last July. Along with Grayscale’s more recent successful petitioning of the SEC.

“The mood music has definitely changed, from the loss of the Grayscale case, and the Ripple case. And I think [the moderator’s] question, though, is why an application now? The timing of the application, not necessarily the time of the approval,” he said.

Top-Down Changes at BlackRock

To Bednall, the answer is clear. Larry Fink no longer views Bitcoin as disreputable. In fact, to hear Bednall tell it, the current BlackRock CEO’s views have undergone something close to a 360-degree turn.

“Blackrock has very much changed its tune over the years, from Bitcoin being an index for money laundering, to now him saying, it’s a global asset in the form of digital gold. So, that’s taken some time to get there,” he said.

In Bednall’s view, BlackRock’s change of attitude on Bitcoin has not occurred in a vacuum. The asset manager is in dialogue with people in the regulatory space, where there has also been a shift in sentiment.

“I’d say that BlackRock are very close to regulators around the world, as well. They have a big team in their regulatory arm, and talk often to the regulators. So they must be getting soundings, there. So that again is an indication of the mood music changing, and the SEC getting closer to approving one of these. Because otherwise, BlackRock wouldn’t have bothered,” Bednall said.

Learn more about BlackRock’s aggressive campaign to expand in the ETF market and add new products.

The Likely Outcome of the ETF Applications

At the end of September, the SEC extended the review period for spot Bitcoin ETF applications from BlackRock, Bitwise, and Valkyrie. The regulator cited a need for continuing review of the potential for misuse of the product should it gain approval.

Even so, Bednall is bullish on BlackRock’s potential to lead the market for the spot Bitcoin ETF. He predicated that BlackRock will command “the bulk of the AUM” in this area of the market.

Bednall said he has worked in the ETF space for 15 years “has never seen so much anticipation” with regard to a product’s approval.

With so many players moving at the same time, Bednall said, he finds it likely that US regulators will resolve the issue more or less in a single ruling or set of rulings.

“I think the SEC will probably approve all the applications at the same time. I don’t think they’re going to want to give anybody first-mover advantage,” he said.