In a move that highlights the intensifying competition among financial giants to launch the first spot Bitcoin ETF in the United States, BlackRock, the world’s largest asset manager, has disclosed in its latest United States Securities and Exchange Commission (SEC) filing that it received $100,000 in seed funding for its spot Bitcoin exchange-traded fund (ETF) in October 2023.
The SEC filing outlines that an unidentified investor committed to purchasing 4,000 shares for $100,000 on October 27, 2023, at $25.00 per share. The investor played a role as a statutory underwriter with respect to the Seed Creation Baskets, indicating active participation in the initial stages of the ETF creation process.
In addition to the seed funding revelation, BlackRock’s filing sheds light on the asset manager’s strategy for handling the sponsor’s fee. Rather than selling BTC (the ETF asset) to cover fees, BlackRock plans to borrow Bitcoin or cash as trade credit from a trade credit lender on a short-term basis. This approach aims to avoid impacting the BTC price significantly.
The settlement of trade credits is set to occur on the business day following the execution date, with a financing fee of 11%, plus the federal funds target rate divided by 365. This innovative approach allows BlackRock to charge its fees via a loan, demonstrating a nuanced strategy to navigate the complexities of managing the ETF’s assets without causing undue market impact.
ETF analyst Eric Balchunas commented on these developments, describing them as an interesting and intricate development in the landscape of ETF creation.
BlackRock was among the early institutional giants to file for a spot Bitcoin ETF in July, joining a pool of 13 applications currently awaiting a decision from the SEC. Despite previous rejections of spot BTC ETF applications, market experts predict that by early 2024, the SEC is likely to approve the first spot BTC ETF in the United States. As the competition heats up, the race to secure regulatory approval for a spot Bitcoin ETF intensifies, with financial heavyweights vying for a coveted position in the rapidly evolving crypto investment landscape.