BlackRock Receives $100,000 Seed Funding for Bitcoin ETF

The world’s largest asset manager, BlackRock, recently received $100,000 in seed funding from an unidentified investor for its spot Bitcoin exchange-traded fund (ETF), according to a filing with the United States Securities and Exchange Commission (SEC). The filing, made in October 2023, revealed that the investor purchased 4,000 shares for $100,000 on October 27, 2023, at a price of $25.00 per share. The investor also acted as a statutory underwriter with respect to the Seed Creation Baskets.

In addition to the funding details, BlackRock’s filing also provided information about the company’s plans to pay the sponsor’s fee. The firm intends to borrow Bitcoin or cash as trade credit from a trade credit lender on a short-term basis. By doing so, BlackRock can charge their fees via a loan instead of selling BTC, which would have a significant impact on the BTC price.

The settlement of trade credits will occur on the business day following the execution date and will incur a financing fee of 11% plus the federal funds target rate divided by 365. For example, if the federal funds target rate was 5.50% on November 20, 2023, the hypothetical financing fee on the borrowed funds would be 11% + 5.5% divided by 365.

The recent revelations about BlackRock’s Bitcoin ETF plans have been described as an interesting development by ETF analyst Eric Balchunas.

BlackRock was one of the first institutional giants to propose and file for a spot Bitcoin ETF in 2023. This move prompted numerous other institutional giants to follow suit. While the SEC had rejected most of the earlier filed spot BTC ETFs before BlackRock entered the race, market experts predict that the first spot BTC ETF in the United States will likely be approved by early 2024.

Overall, BlackRock’s seed funding for its Bitcoin ETF and its plans to pay the sponsor’s fee through borrowing rather than selling BTC highlight the asset manager’s commitment to entering the cryptocurrency market. With other institutional players also vying for a spot BTC ETF, it will be interesting to see how the regulatory landscape evolves and whether the SEC approves the first spot BTC ETF in the near future.