BlackRock’s Bitcoin ETF imposes 12-hour withdrawal rule

In response to growing concerns about the integrity of Bitcoin transactions linked to its exchange-traded fund (ETF), BlackRock has made changes to its ETF application.

A new filing with the U.S. Securities and Exchange Commission (SEC) now requires Coinbase, the fund’s custodian, to process Bitcoin withdrawals within 12 hours. This move addresses investor worries about Coinbase’s onchain settlement processes and transparency.

Coinbase, which manages 10 of the top 11 Bitcoin ETFs, has faced scrutiny over its handling of Bitcoin holdings. Some investors fear that instead of actual Bitcoin, Coinbase may be acquiring “paper BTC” or Bitcoin IOUs, potentially leading to price suppression in the market.

These concerns are amplified by Bitcoin’s stagnant price performance over the past few months, despite growing institutional interest in Bitcoin ETFs.

While Coinbase’s CEO, Brian Armstrong, reassured investors that all ETF transactions are settled on-chain, the company does not disclose specific addresses associated with these transactions.

Armstrong emphasized that as a publicly audited company, Coinbase adheres to strict standards and privacy for its institutional clients.

The conversation around Coinbase’s practices intensified when rumours surfaced about the launch of a new Wrapped Bitcoin (WBTC) product, called Coinbase BTC (cbBTC), further fueling concerns among investors.

Despite this, analysts, including Eric Balchunas from Bloomberg, argue that the ETFs themselves are not responsible for Bitcoin’s price stagnation.

Since its debut earlier this year, Bitcoin ETFs have accumulated significant on-chain holdings, with BlackRock’s IBIT ETF leading the market at over $22.5 billion in assets.

Yet, the question remains whether these funds are truly backing Bitcoin or if unresolved fears about “paper BTC” will continue to weigh on investor sentiment.