BlackRock Bitcoin ETF And The Future Of Bitcoin

Bitcoin, the world’s largest cryptocurrency, is always making the news by attracting a lot of media attention, not only from individual investors but also from corporations. However, the lack of clear and consistent regulation in the United States has been a major obstacle for many companies that want to enter the crypto space. Corporations are itching to get into Bitcoin, but what they are waiting for is clear regulation. Approval of a possible BlackRock Bitcoin ETF could have huge implications for the crypto market.

The Corporate Interest in Bitcoin

Bitcoin has many advantages for corporations that want to diversify their assets, hedge against inflation, reduce transaction costs, and tap into a global and innovative market. Some of the benefits of Bitcoin for corporations include:

• Store of value: Bitcoin has a limited supply of 21 million coins, which makes it resistant to inflation and devaluation. Unlike fiat currencies, Bitcoin cannot be manipulated by central banks or governments. It also has a high degree of scarcity and security, as it is protected by cryptography and a decentralized network of miners.
• Medium of exchange: Bitcoin can be used to transfer value across borders, without intermediaries or fees. Bitcoin transactions are fast, transparent, and irreversible. Bitcoin also enables peer-to-peer transactions, without the need for trusted third parties or intermediaries.
• Innovation and growth: Bitcoin is at the forefront of a new wave of technological innovation and economic growth. Bitcoin is constantly evolving and improving, thanks to its open-source and community-driven nature. Bitcoin also creates new opportunities for businesses to offer new products and services, such as crypto wallets, exchanges, lending platforms, payment solutions, and more.

Here are some of the major corporations that have already invested in Bitcoin:

• Tesla: The electric car maker announced in February 2021 that it had bought $1.5 billion worth of Bitcoin and that it would accept Bitcoin as a form of payment for its products. Tesla’s CEO Elon Musk has been a vocal supporter of Bitcoin and other cryptocurrencies on social media.
• MicroStrategy: The business intelligence firm has been one of the most aggressive corporate buyers of Bitcoin, accumulating $140,000 bitcoins worth roughly $4.2 billion as of June 2023. MicroStrategy’s CEO Michael Saylor has been a vocal advocate of Bitcoin as a superior store of value and a hedge against inflation.
• Square: The payments company founded by Twitter’s CEO Jack Dorsey has been investing in Bitcoin since 2018 when it launched its Cash App service that allows users to buy and sell Bitcoin. Square has also invested $50 million and $170 million in Bitcoin in October 2020 and February 2021 respectively and has no plans of buying any more. Square’s CEO Jack Dorsey has been a long-time supporter of Bitcoin and its potential to empower individuals and communities.
• PayPal: The online payments giant announced in October 2020 that it would allow its users to buy, sell, and hold Bitcoin and other cryptocurrencies on its platform. PayPal also announced in March 2021 that it would allow its users to pay with cryptocurrencies at millions of merchants worldwide. As of 2023 the company owns close to $1B worth of BTC. PayPal’s CEO Dan Schulman has said that he believes in the potential of cryptocurrencies to democratize financial services and create a more inclusive economy.

The Regulatory Hurdles for Bitcoin

Despite the growing corporate interest in Bitcoin, the regulatory environment in the United States remains uncertain and fragmented. Depending on the federal and state regulations, the laws vary in the USA. Some of the main regulatory challenges for Bitcoin include:

• Classification: Bitcoin does not have a clear legal status or definition in the United States. Depending on the context and purpose, Bitcoin can be treated as a commodity, a currency, a security, or a property. This creates confusion and inconsistency for businesses and consumers who want to use or invest in Bitcoin.
• Taxation: The Internal Revenue Service (IRS) treats Bitcoin as property for tax purposes, which means that every transaction involving Bitcoin is subject to capital gains tax. This creates a lot of complexity and burden for taxpayers who have to keep track of their cost basis and gains or losses for every transaction. Moreover, some states have different tax rules for cryptocurrencies than the federal government.
• Money transmission: Most crypto businesses – including cryptocurrency exchanges – are classed by FinCEN as Money Service Businesses (MSB) due to facilitating the trade of Convertible Virtual Currencies (CVCs). CVCs are a USA regulatory term for cryptocurrencies. This means that crypto businesses have to comply with anti-money laundering (AML) and know-your-customer (KYC) requirements, as well as register with FinCEN and obtain licenses from state regulators. This creates a lot of compliance costs and barriers to entry for crypto businesses, especially in states that have strict or unclear regulations.
• Securities: The Securities and Exchange Commission (SEC) has been cracking down on crypto businesses that offer or sell tokens that are deemed to be securities, such as initial coin offerings (ICOs) or decentralized finance (DeFi) projects. The SEC has also been rejecting or delaying applications for Bitcoin ETFs, citing concerns over market manipulation, lack of regulation, and fraud risks in the Bitcoin market.

The Potential Impact of A BlackRock Bitcoin ETF

One of the most anticipated events in the crypto industry is the approval of a Bitcoin ETF by the SEC. A Bitcoin ETF would allow investors to buy and sell shares of a fund that tracks the price of Bitcoin, without having to deal with the technical and security issues of buying and storing Bitcoin directly. A Bitcoin ETF would also provide more liquidity, transparency, and legitimacy to the Bitcoin market.

Among the many firms that have applied for a Bitcoin ETF, BlackRock stands out as the most likely to succeed. BlackRock is the world’s largest asset manager, with over $9 trillion in assets under management. BlackRock has a near-spotless record of getting ETFs approved by the SEC, with an impressive record of 575-1 in favor of approval.

A BlackRock Bitcoin ETF would be a spot ETF, which means that it would buy and sell bitcoins at the end of each trading day to ensure that it accurately represents the true price of the token. Unlike existing Bitcoin-based products, BlackRock’s proposed ETF would address the limitations of current offerings, such as deviations from the actual price of Bitcoin and trading at a premium or discount.

If a BlackRock Bitcoin ETF is approved by the SEC, it could have a huge impact on the price and adoption of Bitcoin. Some of the possible outcomes include:

• Increased demand: A Bitcoin ETF would attract more institutional and retail investors to the crypto space, especially those who are looking for a convenient and regulated way to gain exposure to Bitcoin. This would increase the demand and value of Bitcoin, as well as reduce its volatility.
• Increased innovation: A Bitcoin ETF would also spur more innovation and competition in the crypto industry, as more firms would try to offer similar or better products and services to capture the growing market. This would lead to more diversity and quality in the crypto ecosystem, as well as more opportunities for entrepreneurs and developers.
• Increased regulation: A Bitcoin ETF would also increase the regulatory scrutiny and oversight on the crypto sector, as the SEC and other regulators would have more authority and interest in ensuring the compliance and integrity of the market. This could lead to more clarity and consistency in the regulatory framework for cryptocurrencies, as well as more enforcement actions against illegal or fraudulent activities.

Conclusion

Bitcoin is a revolutionary technology that has many benefits for corporations that want to enter the crypto space. However, the lack of clear and consistent regulation in the United States has been a major obstacle for many companies that want to do so. A globally coordinated approach to cryptocurrency regulation is needed if states want to make the most of the technology while stamping out illicit uses of Bitcoin and digital currencies. One of the key events that could trigger such a regulatory shift is the approval of a BlackRock Bitcoin ETF by the SEC, which could have a monumental impact on the price and adoption of Bitcoin, especially for the next crypto Bull run for 204/2025.