Joseph Chalom, an executive at BlackRock, recently made statements about counterparty knowledge being critical to engaging institutions in Bitcoin and the DeFi world.
This comes shortly after the company’s application for a Bitcoin ETF
Accordingly, let’s see below how BlackRock’s views could play a relevant role in the ongoing discussion about regulation of the industry.
Summary
BlackRock: “the key to engaging institutions in DeFi is knowing the counterparties”
As anticipated, Joseph Chalom, head of strategic partnerships at BlackRock, stressed the importance of developing a digital identity infrastructure to engage large institutions in decentralized finance (DeFi).
Specifically, during the State of Crypto Summit organized by Coinbase and the Financial Times in New York, Chalom said that knowing the identity of counterparties is critical.
This approach might be relevant for regulated institutional players such as BlackRock, the world’s largest asset manager, but on the other hand it could raise privacy concerns in the cryptocurrency context.
However, BlackRock has recently shown a growing interest in the sector by submitting an application to list an exchange-traded fund (ETF) based on Bitcoin.
And so, considering its predominant position, BlackRock’s preferences may influence the evolution of the industry’s rules more than other players who have long led the cryptocurrency world.
Chalom, in particular, stated the following:
“The first problem is, who am I trading with? We go to jail if we don’t know who we’re trading with. I’m not optimistic that the digital identity problem will be solved in the short term. Issues like automated market making in DeFi instead of central order limits are just fig leaves.”
BlackRock application for a Bitcoin ETF: the SEC may not be able to object this time around
BlackRock’s iShares unit filed paperwork with the US Securities and Exchange Commission (SEC) on Thursday to create an ETF based on the spot Bitcoin (BTC).
According to the filing, the fund, which would take the name iShares Bitcoin Trust, would have Bitcoin held by a custodian on behalf of the trust as its main asset. In addition, the filing states that the custodian of the cryptocurrencies would be Coinbase (COIN).
For instance, we see that although the SEC has approved several Bitcoin futures-based ETFs, it has specifically rejected attempts by other asset management firms to launch a spot Bitcoin-based ETF, including Grayscale, VanEck, and WisdomTree.
However, BlackRock may not be easily rejected by the SEC. As the world’s largest asset manager with more than $10 trillion in assets under management (AUM), the company and its CEO Larry Fink have considerable political power that could equate to that of the SEC and its leader Gary Gensler.
Sui Chung, CEO of CF Benchmarks, a subsidiary of cryptocurrency exchange Kraken, commented on the filing thus:
“The proposed ETF is compared to the CME CF Bitcoin Reference Rate. CF Benchmarks only source price data from cryptocurrency exchanges that adhere to the highest possible standards of market integrity and transparency. This protects investors as the products compared to it can then consistently and reliably track the spot price of the underlying asset.”
Will Bitcoin enter a more promising phase? Let’s take a look
Ali Martinez, a cryptocurrency analyst, recently shared an interesting perspective on Twitter regarding the current state of Bitcoin.
Specifically, using a market sentiment chart known as “The Wall Street Cheat Sheet,” Martinez argues that Bitcoin is on the verge of entering a more promising phase.
According to Martinez, Bitcoin is approaching the “hope” phase, in which the assets’ chances for recovery become more apparent. This phase will be followed by “optimism,” “belief,” “excitement,” and finally “euphoria.”
However, with the rise in Bitcoin’s price, entities in the cryptocurrency market have seized the opportunity to make significant profits.
In fact, according to Glassnode, entities have made profits worth as much as $537 million.
We emphasize that this represents the second largest profit-taking event in the past year, highlighting the growing interest and financial gains associated with Bitcoin.
