BlackRock amends IBIT over Coinbase ETF custody issues

BlackRock has filed an amendment for its spot Bitcoin (CRYPTO:BTC) ETF (IBIT) following concerns raised about Coinbase’s custodial practices. 

The amendment, submitted to the U.S. Securities and Exchange Commission (SEC) on September 16, addresses transparency issues raised by investors, specifically regarding whether Coinbase, as the custodian for BlackRock’s ETF, provides on-chain proof of Bitcoin holdings. 

The filing requests that Bitcoin withdrawals from Coinbase be processed within 12 hours to ensure transactions are recorded on the blockchain promptly. 

This comes amid speculation that Coinbase could be using "paper BTC" or Bitcoin IOUs, which some believe may be influencing Bitcoin’s stagnant price performance, despite substantial inflows into Bitcoin ETFs. 

Coinbase CEO Brian Armstrong responded to these concerns by stating that “all ETF mints and burns we process are ultimately settled on-chain,” and that all trades settle within one business day. 

Tron founder Justin Sun previously raised concerns about the lack of proof of reserves from Coinbase. 

BlackRock’s amendment reflects an effort to improve operational transparency and liquidity for its ETF. 

ETF analyst Eric Balchunas addressed the speculation, noting that BlackRock’s ETFs have played a role in preventing further price declines for Bitcoin. 

Coinbase’s role as the custodian for most Bitcoin ETFs has sparked some concerns about its position as a potential single point of failure in the market. 

Despite these worries, Coinbase continues to manage a significant portion of Bitcoin ETF assets, playing a key role in institutional Bitcoin investment.

At the time of reporting, the Bitcoin price was $63,042.62.