Why Doesn’t BlackRock Directly Ensure the Security of the Bitcoin It Holds for Its Clients?
I'm very interested in your opinion on this matter.
In recent days, there's been a growing controversy in the Bitcoin world involving BlackRock and Coinbase.
Given Coinbase's enormous weight in the Bitcoin storage of the various American Bitcoin Spot ETFs, this had an even more enormous potential impact.
Coinbase was accused of failing to guarantee BTC holdings for these Bitcoin Spot ETFs. This reinforced the possibility that Coinbase wasn't holding all the Bitcoin it claimed to. For some, there was even a potential risk of an FTX-style situation with its Bitcoin paper.
Eric Balchunas, senior ETF analyst for Bloomberg, gave some pointers to try and extinguish this controversy quickly:
Eric Balchunas tells us that BlackRock runs its node on the Bitcoin Blockchain to check the Bitcoin balance of its addresses on the Coinbase Prime infrastructure every night, to validate that the expected BTC holding of its $IBIT Bitcoin Spot ETF is indeed accurate.
The aim is clear: to give both institutional and retail clients every guarantee that their money is correctly invested and that there is no risk of an FTX bis.
That's all well and good, but I'd like to ask a question after reading this information:
Why hasn't BlackRock set up its infrastructure to manage the Bitcoin private keys it holds for its clients as part of its Bitcoin Spot ETF?
Given BlackRock's resources, it would have been logical for BlackRock to follow the same path as Fidelity, which is the only financial giant to directly manage the Bitcoin private keys of its Bitcoin Spot ETF.
This question is on my mind, and I confess I can't understand why BlackRock hasn't done this, and why BlackRock hasn't announced its intention to go in this direction.
It would put an end to all the Bitcoin paper controversy and it would show that BlackRock does practice what its analysts say about Bitcoin. After all, they keep repeating that Bitcoin is an asset that gives you power since it's free of counterparty risk and not tied to governments. True, but only if you own the private keys associated with your Bitcoin.
So what is BlackRock waiting for?
I'm very interested in your opinion on this matter.
I think it's as simple as Coinbase has proved they can handle this very well so far, and possibly the best in the business at it. So it's best to trust the best.