BlackRock has slightly amended its relationship with Coinbase Custody regarding the redemption of its spot Bitcoin ETF product
Reputable investment asset management firm BlackRock has amended its Bitcoin Exchange-traded Fund (ETF) custody agreement with Coinbase. This time, the asset manager wants the American cryptocurrency exchange to process its Bitcoin withdrawals within 12 hours of receiving an instruction.
This came only a few days after BlackRock received approval from the SEC to trade options on its spot Bitcoin ETF product.
Investors Fear Coinbase Engagement With Bitcoin
The spot Bitcoin ETF issuer filed for this modification with the United States Securities and Exchange Commission (SEC) on September 16. BlackRock took this step amidst a growing concern amongst its investors over the exchange’s on-chain settlement process. These investors have asked Coinbase to produce onchain verification of Bitcoin purchases for its spot ETFs.
It is worth acknowledging that Coinbase is the Bitcoin custodian for 10 out of 11 top-spot Bitcoin ETFs launched in the US at the beginning of this year. It also fulfills the same responsibility for eight of nine recently approved Ethereum ETFs in the region.
Investors fear that the custodian may acquire “paper BTC” or Bitcoin IOUs, which could artificially suppress the actual Bitcoin price. Unfortunately, Bitcoin’s price action in the last three months gives credence to these concerns. The influx of institutional investors has not been able to contribute significantly to a price rally for the flagship digital currency.
At this time, Bitcoin was trading at $63,471.83, following a 1.15% increase in the last 24 hours. This slightly improved price action was possible after the US Federal Reserve announced a 50-basis-point rate cut on September 18.
Coinbase cbBTC Has Transparency Concerns
Meanwhile, Coinbase recently launched a wrapped Bitcoin product dubbed cbBTC on its Base Network, with backing from BlackRock. cbBTC is an ERC-20 token pegged one-to-one to Bitcoin on Coinbase. This product is equally contributing to investor’s fear. Top crypto industry players like Justin Sun, Tron founder, have shared concerns, especially regarding product transparency.
Sun pointed out the lack of Proof-of-Reserve (PoR) for cbBTC.
Senior Bloomberg ETF Analyst Eric Balchunas stressed BlackRock’s involvement as a reason investors should not panic. However, there is still growing skepticism in the digital asset community about whether BlackRock’s backing restores confidence in the product.
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