BlackRock Challenges SEC Over Crypto ETF ‘Discrimination’

BlackRock, the world’s largest asset management firm with over $8 trillion in assets, is currently in a dispute with the U.S. Securities and Exchange Commission (SEC) over the regulation of cryptocurrency exchange-traded funds (ETFs). The firm argues that there should be no distinction between futures ETFs, which have been approved by the SEC, and spot market ETFs for Bitcoin (BTC) and Ethereum (ETH).

In a recent filing, BlackRock emphasized that the SEC’s refusal to approve spot market crypto ETFs, despite having approved futures ETFs, lacks a solid basis. The firm pointed out that futures ETFs are priced based on the underlying spot market, making the two products fundamentally similar. BlackRock stated, “Given that the Commission has approved ETFs that offer exposure to ETH futures, which themselves are priced based on the underlying spot ETH market, the Sponsor believes that the Commission must also approve ETPs that offer exposure to spot ETH, like the Trust.”

BlackRock also criticized the SEC’s application of the Investment Company Act of 1940 to spot ETFs. The firm argues that the Act’s investor protections don’t address the risks associated with the assets held by ETFs, such as potential market manipulation. “The 1940 Act explicitly lists out the types of abuses it seeks to prevent, and places certain restrictions related to accounting, borrowing, custody, fees, and independent boards, among others. Notably, none of these restrictions address an ETF’s underlying assets, whether ETH futures or spot ETH, or the markets from which such assets’ pricing is derived, whether the CME ETH futures market or spot ETH markets.”

BlackRock has recently taken decisive steps in the cryptocurrency space. The firm registered its iShares Ethereum Trust in Delaware, following a similar move with its Bitcoin trust. The company is actively awaiting approval for these trusts, highlighting its commitment to integrating digital assets into its investment strategies.