Coinbase would be the custodian of the proposed BlackRock spot bitcoin ETF.

BlackRock (NYSE: BLK) has submitted an application to the US Securities and Exchange Commission (SEC) for a spot bitcoin exchange-traded fund (ETF). If approved, it would become the first publicly traded spot bitcoin ETF in the US, trading on the Nasdaq stock market. BlackRock already operates a private spot bitcoin trust and the ETF would further strengthen its partnership with Coinbase (NASDAQ: COIN), which would act as the custodian for the fund’s bitcoin.

The launch of a spot bitcoin ETF by BlackRock could provide a boost to cryptocurrencies, especially in light of recent negative events such as the collapse of FTX and the SEC’s lawsuits against Coinbase and Binance. However, it is uncertain whether the SEC will approve BlackRock’s application, as it has rejected similar proposals in the past due to concerns about unregulated exchanges and market manipulation risks.

The SEC is also facing a lawsuit from Grayscale over its refusal to convert the world’s largest crypto investment vehicle into a listed ETF. BlackRock’s move comes at a time when the SEC has proposed new custody rules to enhance asset managers’ responsibilities in safeguarding customer assets.

Although the price of bitcoin has dropped significantly from its 2021 peak, BlackRock’s interest in cryptocurrencies highlights their appeal to major financial institutions. Sui Chung, CEO of CF Benchmarks, noted that BlackRock’s proposed ETF could offer a more familiar and accessible option to the 80% of Americans who have not owned bitcoin.

BlackRock’s founder, Larry Fink, previously skeptical of cryptocurrencies, acknowledged the interesting developments in the digital asset space and the company’s ongoing exploration of the digital assets ecosystem. During its recent investor day, BlackRock emphasized its ability to launch new ETFs and provide clients with a wide range of asset classes, boasting over 1,300 different ETFs.

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