BlackRock Bitcoin ETF Requests Coinbase to Enable 12Hour BTC Withdrawals

The largest asset manager in the world has made an amendment to its Bitcoin exchange-traded fund (ETF) in response to concerns from investors regarding Coinbase’s onchain settlement practices. BlackRock has filed an amendment requiring Bitcoin withdrawals from the ETF’s custodian, Coinbase, to be completed within 12 hours. This amendment follows industry-wide concerns about Coinbase’s custodial practices for ETFs. Investors have been requesting proof of the Bitcoin purchased on behalf of the spot ETFs to be provided onchain. Coinbase currently acts as custodian for the majority of spot Bitcoin ETFs and recently approved Ether ETFs in the US. Despite the institutional inflows from Bitcoin ETFs, the price of BTC has remained stagnant for the past three months. This has led to concerns that Coinbase is purchasing “paper BTC” or Bitcoin IOUs on behalf of ETF issuers, which could be suppressing the price of Bitcoin. However, all ETF transactions are ultimately settled onchain, even though not all ETF addresses are publicly shared, according to Coinbase’s CEO Brian Armstrong. In response to investor concerns, Armstrong clarified the situation in a recent post. Investor concerns began to escalate in August when Coinbase hinted at the development of a new Wrapped Bitcoin called Coinbase BTC. Since their launch in January, the ETFs have accumulated over $59.2 billion worth of onchain holdings. BlackRock’s IBIT remains the largest Bitcoin ETF, holding over $22.5 billion worth of onchain assets. Despite the accusations, ETFs are not the cause of Bitcoin’s recent price slump, which was primarily driven by native Bitcoin holders, according to senior ETF analyst Eric Balchunas.