BlackRock amends Coinbase custody agreement to require 12 hour withdrawals amid debt rumors BlackRock amends Coinbase custody agreement to require 12 hour withdrawals amid debt rumors
Modifications reflect BlackRock's efforts to enhance operational frameworks and improve liquidity amid recent allegations.
2 min read
Updated: Sep. 20, 2024 at 9:23 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
BlackRock has amended its custody agreement with Coinbase, updating operational procedures for its iShares Bitcoin Trust ETF. According to an SEC filing dated Sept. 16, the amendment to the Coinbase Prime Broker Agreement introduces changes aimed at improving withdrawal processes and asset management during unsettled trades.
The modifications shorten Coinbase Custody withdrawal processing time when handling withdrawals from the Vault Balance to a public blockchain address while Trade Credits remain unpaid. The agreement also permits the Trust to withdraw bitcoin from either the Vault Balance or the Trading Balance to public blockchain addresses, provided that an amount equivalent to the unpaid Trade Credit remains in the aggregate balances after such withdrawal.
These adjustments reflect BlackRock’s efforts to enhance the operational framework of its iShares Bitcoin Trust ETF. By refining withdrawal capabilities and offering flexibility in managing assets during unsettled trades, the firm aims to improve liquidity and access for institutional investors who require timely asset movements without being hindered by outstanding trade settlements.
As detailed in the SEC filing, the amendment updates Section 2.1 of the Custodial Services Agreement. Coinbase Custody must now process a withdrawal of digital assets to a public blockchain address within 12 hours of receiving instructions from the Trust or its authorized representatives, subject to specific balance requirements.
This development comes amid recent allegations against Coinbase, claiming the exchange was not using BlackRock’s funds to purchase actual bitcoins for the ETF. Social media rumors suggested that Coinbase was issuing letters of debt instead of backing the ETF with Bitcoin and manipulating Bitcoin’s price using BlackRock’s funds.
Bloomberg senior ETF analyst Eric Balchunas refuted these allegations, stating that BlackRock would act if Coinbase were “screwing around” with their Bitcoin. He emphasized that such behavior would violate regulations and that BlackRock is serious about its operations. Balchunas suggested that these rumors stem from investors seeking explanations for the selling pressure keeping Bitcoin in a downtrend since March and from inherent skepticism toward institutional involvement in digital assets.
Coinbase CEO Brian Armstrong also addressed the claims, clarifying that all mints and burns related to the ETFs in the firm’s custody are ultimately settled on-chain. He noted that institutional clients have off-chain options before trades are settled on-chain, such as over-the-counter desk trading, with funds settled in Coinbase Prime vaults within one business day. Armstrong added that while users must trust a centralized custodian to store the bitcoin backing Coinbase’s products, the firm operates transparently and complies with regulatory standards.
These contractual updates may also address regulatory expectations and operational best practices, focusing on reducing withdrawal processing times and ensuring asset availability during unsettled trades.
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Liam 'Akiba' Wright
Also known as "Akiba," Liam Wright is a reporter, podcast producer, and Editor-in-Chief at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
BlackRock
BlackRock, synonymous with global asset management, is an American multinational investment management corporation based in New York City.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
The BlackRock Bitcoin ETF, known as the iShares Bitcoin Trust (IBIT), is an investment fund that provides regulated exposure to Bitcoin for investors.
