BlackRock’s Bitcoin ETF Requires in 12-Hour BTC Withdrawals from Coinbase

The world’s largest asset manager, BlackRock, has submitted an amendment for its Bitcoin exchange-traded fund (ETF) in response to concerns over Coinbase’s on-chain settlement procedures.

On September 16, BlackRock filed an amendment with the United States Securities and Exchange Commission (SEC), specifying that Bitcoin withdrawals from the ETF’s custodian, Coinbase, must be processed within 12 hours. The filing states:

“Subject to confirmation of the foregoing required minimum balance, Coinbase Custody shall process a withdrawal of Digital Assets from the Custodial Account to a public blockchain address within 12 hours of obtaining an Instruction from Client or Client’s Authorized Representatives.”

This amendment was introduced following growing concerns within the industry regarding Coinbase’s custodial practices for ETFs. Many investors have been pressing Coinbase for more transparency, specifically requesting on-chain verification of the Bitcoin purchased for the spot ETFs.

Coinbase currently acts as the custodian for 10 of the 11 spot Bitcoin ETFs and is responsible for eight of the nine newly approved Ether ETFs in the United States.

Coinbase CEO clarifies investor concerns over Bitcoin ETF custody practices

Despite the influx of institutional investments through Bitcoin ETFs, the price of Bitcoin has remained relatively stagnant for the past few months. This has led to growing investor anxiety, with some speculating that Coinbase may be purchasing “paper BTC” or Bitcoin IOUs for the ETFs, contributing to the price stagnation.

However, Coinbase’s co-founder and CEO, Brian Armstrong, has emphasized that all ETF transactions are settled on-chain, even though not all ETF wallet addresses are made public. In response to the concerns, Armstrong wrote in a post on X (formerly Twitter) on September 14:

“If you want audits, Deloitte audits us annually, we’re a public company. I doubt our institutional clients want people dusting all their addresses, and it’s not our place to share for them. This is what it looks like if you want a bunch of institutional money to flow into Bitcoin.”

Investor concerns escalated in August when Coinbase hinted at the creation of a new Wrapped Bitcoin (wBTC), referred to as Coinbase BTC (cbBTC).

BlackRock and Bitcoin ETFs aren’t the cause of the BTC price slump: Analyst

Since their launch in January, Bitcoin ETFs have accumulated over $59.2 billion in on-chain holdings, according to data from Dune. BlackRock’s IBIT remains the leading Bitcoin ETF, holding a market share of more than 38% and over $22.5 billion in on-chain assets.

Despite the criticism, ETFs are not the main driver behind Bitcoin’s recent price drop, according to Eric Balchunas, a senior ETF analyst at Bloomberg. Balchunas explained in a post on X on September 15:

“I get why these theories exist and ppl want to scapegoat the ETFs. Bc it is too unthinkable that the native HODLers could be the sellers. But they are… All the ETFs and BlackRock have done is save BTC’s price from the abyss repeatedly.”

By February 15, ETFs represented about 75% of new Bitcoin investments, with the price of Bitcoin surpassing the $50,000 mark at that time.

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