Coinbase Explores a Crypto ETF – Report

News and Analysis

Leading U.S. cryptocurrency exchange Coinbase is reportedly exploring launch of a crypto ETF and has sought the expertise of BlackRock, the world’s largest asset manager.

According to Business Insider, in recent weeks the San Francisco-based firm has held conversations with members of BlackRock’s blockchain working group to tap into the firm’s expertise with launching exchange-traded products.

Coinbase currently offers a variety of products and services to both retail and institutional investors, including a cryptocurrency trading platform, an ERC-20 token wallet, and most recently, a custody product for institutional investor assets. The report said that Coinbase was exploring a crypto ETF in order to allow retail investors to gain access to the volatile crypto markets.

BlackRock’s blockchain working group includes the firm’s employees from across its businesses. The group’s main goal is to identify applications of blockchain technology in financial services, the report mentioned, citing a person with knowledge of the group. However, it remains to be seen whether the discussions were one-off or an ongoing dialogue between the exchange and BlackRock as the latter did not provide Coinbase with any tangible recommendations.

BlackRock is no stranger to ETFs, as it manages the popular iShares division – a family of ETFs. Each iShares fund tracks a bond or stock market index.

The source pointed out that BlackRock itself does not have any interest in being a crypto fund issuer. The asset manager’s CEO Larry Fink had earlier called Bitcoin an “index of money laundering”. Later, Fink told Bloomberg that BlackRock was studying coins to see how they perform and to determine whether they become “legitimized” as alternatives to cash.

If Coinbase were to develop a crypto ETF, it would join a number of other firms also looking to launch their own, including rival Gemini, Bitwise Asset Management, VanEck along a string of others.

As previously reported by ForkLog, last month The U.S. Securities and Exchange Commission rejected a total of nine inquiries from three companies – Proshares, GraniteShares and Direxion – to bring Bitcoin-based ETFs to market, claiming that the products did not comply with the requirements by the “Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

However, the next day the SEC said it will review the decision.

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