BlackRock has updated its custody agreement with Coinbase, refining procedures related to its iShares Bitcoin Trust ETF. A filing with the SEC on Sept. 16 shows that the amendment introduces new changes to improve withdrawal processes and asset management during unsettled trades.
Shortened Withdrawal Processing Time
The revisions shorten Coinbase Custody’s withdrawal processing time when transferring assets from the Vault Balance to a public blockchain address. This applies even when Trade Credits remain unpaid. Additionally, the agreement allows the Trust to withdraw bitcoin from either the Vault or Trading Balance. However, an equivalent amount of unpaid Trade Credit must remain in the aggregate balances after the withdrawal.
Enhancing Liquidity for Institutional Investors
These adjustments highlight BlackRock’s focus on improving the operational framework of its iShares Bitcoin Trust ETF. By refining withdrawal capabilities and providing flexibility in managing assets, BlackRock aims to improve liquidity for institutional investors. This change ensures timely asset movement, even when there are outstanding trade settlements.
Details from the SEC Filing
According to the SEC filing, the amendment updates Section 2.1 of the Custodial Services Agreement. Coinbase Custody must now process digital asset withdrawals to a public blockchain address within 12 hours of receiving instructions. These instructions must come from the Trust or its authorized representatives, and certain balance requirements must be met.
Addressing Allegations Against Coinbase
This development follows allegations against Coinbase, accusing the exchange of failing to use BlackRock’s funds to purchase actual bitcoin for the ETF. Rumors circulated on social media, claiming Coinbase issued debt letters instead of backing the ETF with Bitcoin. Some believed Coinbase manipulated Bitcoin’s price using BlackRock’s funds.
Refuting the Allegations
Bloomberg’s senior ETF analyst, Eric Balchunas, refuted these allegations. He stated that BlackRock would take action if Coinbase mishandled their Bitcoin. Such behavior would violate regulations. Balchunas believes that the rumors stem from investors trying to explain Bitcoin’s downtrend since March and skepticism toward institutional involvement in digital assets.
Coinbase CEO’s Clarification
Coinbase CEO Brian Armstrong addressed the claims, clarifying that all transactions related to ETFs in Coinbase’s custody are settled on-chain. He explained that institutional clients can settle trades off-chain, including over-the-counter desk trading. Funds settle in Coinbase Prime vaults within one business day. Armstrong emphasized that while users must trust Coinbase as a centralized custodian, the firm operates transparently and complies with regulations.
Aligning with Regulatory Expectations
These updates to the custodial agreement address regulatory expectations and operational best practices. The focus on reducing withdrawal times and ensuring asset availability during unsettled trades reflects BlackRock and Coinbase’s commitment to meeting the needs of institutional investors.
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