In a significant move to enhance its cryptocurrency offerings, BlackRock, the asset management giant, has filed to create a Delaware trust company for its proposed Bitcoin Premium Income ETF. This filing, made public on Thursday, marks an ambitious step by the firm to capitalize on the growing interest in the Bitcoin market.
According to Bloomberg ETF analyst Eric Balchunas, this new product will employ a covered call strategy on Bitcoin futures, generating income through premiums while exposing investors to Bitcoin’s price movements. However, this strategy may sacrifice some potential appreciation compared to BlackRock’s existing iShares Bitcoin ETF (IBIT), which closely tracks Bitcoin’s performance.
Describing the initiative, Balchunas noted, “This is a covered call Bitcoin strategy in order to give BTC some yield. This will be a ’33 Act spot product’, in reference to the Securities Act of 1933, and is considered a sequel to the $87 billion IBIT.”
The registration of a trust company in Delaware typically suggests that the ETF issuer is preparing to submit an S-1 registration statement or a 19b-4 filing to the Securities and Exchange Commission (SEC) shortly, officially commencing the regulatory approval process.
BlackRock’s proposal comes at a time when US regulators have indicated a willingness to approve a broader range of cryptocurrency investment products, aligning with a vision to position the country as the “crypto capital of the world.” The addition of the Bitcoin Premium Income ETF would bolster BlackRock’s already impressive iShares Bitcoin ETF, launched in January 2024, which has attracted over $60.7 billion in inflows, easily making it the largest in the sector. The next closest competitor, the Fidelity Wise Origin Bitcoin Fund (FBTC), has garnered $12.3 billion in funds since its inception.
The desire for yield-generating products linked to Bitcoin has been slowly taking shape within traditional finance. Historically, many financial firms have been hesitant to dive into Bitcoin due to its perceived lack of yield-generating potential. However, solutions are now emerging; for instance, Strategy’s convertible preferred stock offering utilizes its substantial Bitcoin holdings to provide consistent income for investors.
If the SEC greenlights BlackRock’s new ETF, it would contribute to the limited number of yield-generating Bitcoin investment options available in the United States. Notably, Balchunas has mentioned that while many other cryptocurrencies are on the verge of being turned into ETFs, BlackRock appears to be concentrating its efforts solely on Bitcoin and Ether (ETH) for the moment, intentionally steering away from the broader altcoin market. “This makes the horse race for these other coins much more wide open,” he stated.
As the regulatory landscape evolves, potential approvals for various cryptocurrency ETFs might accelerate, especially following the SEC’s recent approval of a generic listing standard. This change would streamline the evaluation process for new applications, making it easier for more cryptocurrencies to enter the ETF arena. Among those that could soon receive ETF treatment are Litecoin (LTC), Solana (SOL), XRP, and Dogecoin (DOGE).
BlackRock’s strategic move signals its commitment to being at the forefront of the digital asset investment landscape, while also catering to the evolving preferences of yield-seeking investors in the growing universe of cryptocurrency.
