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A Bloomberg analyst has raised concerns over BlackRock’s recent update on Bitcoin custody in collaboration with Coinbase. According to reports, the world’s largest asset manager has revised its requirements for Bitcoin custody, mandating Coinbase to deposit Bitcoin directly on-chain within 12 hours of an order. This move follows rising concerns that BlackRock’s Bitcoin ETFs might be trading with “paper BTC” rather than actual crypto assets.
BlackRock and Coinbase’s New Custody Requirements
The analyst pointed out that BlackRock’s updated instructions to Coinbase have sparked discussions in the market. The new policy demands that Coinbase handle Bitcoin deposits directly on-chain within a tight timeframe. This update aims to reassure investors that the firm’s Bitcoin ETFs are backed by real cryptocurrency assets, rather than derivatives or “paper BTC.”
Addressing Concerns Over “Paper BTC”
The growing concern among market participants is that BlackRock might be facilitating trades with Bitcoin ETFs that aren’t backed by actual Bitcoin. However, by updating its custody requirements, BlackRock aims to quash these fears. The 12-hour window for on-chain deposits suggests a strong effort to maintain transparency and ensure that the ETFs are backed by real Bitcoin holdings.
Institutional Investors and Custody Confidence
According to the analyst, while BlackRock has not made these details publicly available due to regulatory and compliance constraints, the firm is willing to provide verified balances to institutional clients upon request. The analyst also noted BlackRock’s extensive experience managing over 500 ETFs with trusted custodians, emphasizing that investors can be confident their assets are secure, far from the fraudulent practices that led to the downfall of FTX under Sam Bankman-Fried.
BlackRock’s established reputation in managing large-scale ETFs instills confidence in investors, ensuring that their funds are handled with the highest standards. The transparency around Bitcoin custody could help dispel concerns about potential manipulation or risks in the market.
What’s Next for BlackRock and Coinbase?
As BlackRock continues to refine its approach to Bitcoin custody and ETF management, it is likely that further developments will follow. Both institutional and retail investors will be watching closely as these efforts unfold, with many hoping that this move will set a new standard for transparency in the cryptocurrency market.
