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BlackRock bets big on bitcoin, major European banks move into crypto custody, crypto exchanges face further restrictions in Australia and the LUNA founder is sentenced to four months in prison.
BlackRock, the world’s largest asset management firm, has filed an application in the US to launch a spot bitcoin exchange-traded fund (ETF).
Known as the iShares Bitcoin Trust, the planned ETF will “consist primarily of bitcoin held by a custodian on behalf of the Trust” and will seek to “reflect generally the performance of the price of bitcoin.”
In its filing to the Securities and Exchange Commission (SEC), BlackRock said that Coinbase and Bank of New York Mellon (BNY) respectively will act as the custodians of bitcoin and cash held on behalf of the Trust.
Throughout the 100-page application, BlackRock refers to a wide range of “risk factors” that potential investors should be aware of, including “extreme volatility” in the spot bitcoin market.
“The digital asset markets may still be experiencing a bubble or may experience a bubble again in the future,” it said. “Extreme volatility may persist and the value of the shares may significantly decline in the future without recovery.”
In particular, BlackRock, which currently holds over $9trn in assets under management (AUM), warned that the value of the Trust will depend on the “future acceptance” of bitcoin.
WisdomTree, another US asset management firm, also filed its own bitcoin ETF application with the SEC this week, known as the WisdomTree Bitcoin Trust.
WisdomTree is one of several firms, alongside Grayscale and VanEck, which have previously tried and failed to launch a spot bitcoin ETF in the US.
As covered by VIXIO, the SEC has rejected all such applications to date primarily due to concerns that the spot bitcoin market lacks protections and oversight against fraud and manipulation.
It is unclear how BlackRock’s application will allay the SEC’s concerns, given that allegations of fraud and manipulation have multiplied since the SEC rejected Grayscale’s application in June 2022.
Elsewhere in the filing, BlackRock makes clear that it is aware of these allegations, thanks to the inclusion of long passages on the collapse and bankruptcies of Celsius, Voyager Digital, Three Arrows Capital, BlockFi, Genesis Global Capital and FTX.
Also included is a section on the risks posed by stablecoins to the spot bitcoin market, particularly from Tether, which has twice been sanctioned in the US due to doubts about its reserves.
“Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants in the bitcoin market,” said BlackRock.
In the crypto world, reception of the application was mixed. Matt Hougan, chief investment officer at Bitwise, said the ETF would help bring more institutional capital into the space.
“The future of crypto is more BlackRock and less Binance,” Hougan said on Twitter.
But others warned that a BlackRock ETF would represent a “corporate capture” of the crypto markets.
"They're not trying to kill crypto,” said Scott Melker, host of the Wolf of All Streets crypto podcast. “They're trying to kill the current crypto industry and then hand it over to their cronies.”
EU banks making crypto moves
This week, three of Europe’s largest banks confirmed that they are making preparations to launch digital asset custody services.
In France, CACEIS Bank, the asset management arm of Crédit Agricole and Santander, registered with the Financial Markets Authority (AMF) as a digital asset custodian.
Meanwhile in Germany, Deutsche Bank confirmed in a statement to CoinDesk that it has applied for a similar custodian license with the Federal Financial Supervisory Authority (BaFin).
Cuscal imposes new restrictions on crypto exchanges
In Australia this week, payment gateway Cuscal imposed new restrictions on crypto exchanges handling deposits and withdrawals of fiat currency.
The restrictions, which are similar to those imposed by Commonwealth Bank (CBA) earlier this month, include a 24-hour hold on first-time inbound payments of any size and a 24-hour delay on outbound payments of any size.
Cuscal’s tightening of controls for crypto exchanges came to light after its updated merchant terms of service were shared by payments firm Zepto with Blockchain Australia, the country’s largest crypto trade association.
Michael Bacina, chair of Blockchain Australia, condemned the move, calling it an overreach in the country’s fight against scams — including crypto scams.
“Australians rightly expect businesses they deal with to pitch in to help tackle this problem, but they also expect to be able to spend their money and use their assets as they choose, without undue restrictions,” he said.
“Striking a balance requires evidence-based decision-making so that the costs of protection are proportionate to the benefit that protection brings.”
Up until last month, as covered by VIXIO, both Cuscal and Zepto had been involved in providing payment services to Binance Australia.
With Australia’s major banks now taking a risk-averse approach to Binance, Cuscal was pressured to end its relationship with the exchange.
When Cuscal terminated its relationship with Binance, this also meant that Zepto, which had been sponsored by Cuscal, lost Binance as a client.
One month later, Banking Day reported that Zepto plans to cut 20 percent of its staff, prompting speculation as to its dependence on Binance.
“This raises more questions than it answers, especially given that Binance was exited only a couple of weeks ago,” said Brad Kelly, managing director of Australia’s Payment Services consultancy.
“Just how much of Zepto's business depended on Binance?
LUNA founder imprisoned in Montenegro
Finally, Do Kwon, the South Korean founder of Terraform Labs, was sentenced to four months in prison for falsifying documents to enter Montenegro.
As the man behind the TerraUSD stablecoin and its LUNA collateral token, Do Kwon has been wanted by authorities since the collapse of TerraUSD in May last year.
After an Interpol red notice was issued last September for his arrest, the South Korean programmer was arrested in Montenegro in March, as was Terraform’s former CFO, Han Chang-joon.
The pair were travelling with two Costa Rican passports, two Belgian passports and two ID cards, but both pleaded not guilty.
As part of the sentence, the three months that they have already spent in detention will count as time spent in prison, meaning that both will be released in little over a month,
In the meantime, authorities in Montenegro will continue to liaise with their counterparts in the US and South Korea, both of which have requested Do Kwon’s extradition.
In the US, Do Kwon is facing civil charges of fraud and unregistered securities violation, while in South Korea, he is facing criminal charges of fraud and other financial violations.
