BlackRock Secures $100,000 in Initial Funding for Bitcoin ETF, Reveals SEC Filing

In October 2023, BlackRock, the world's largest asset manager, secured a seed investment of $100,000 from an undisclosed investor for its spot Bitcoin exchange-traded fund (ETF), as disclosed in its recent filing with the United States Securities and Exchange Commission (SEC). The SEC document indicated that on October 27, 2023, the investor committed to buying 4,000 shares at $25.00 each, acting as a statutory underwriter for the Seed Creation Baskets.

BlackRock's filing also shed light on its approach to handling the sponsor's fee. The asset manager intends to use short-term loans of Bitcoin or cash from a trade credit lender, allowing it to charge fees through these loans without significantly affecting the Bitcoin price by avoiding the sale of BTC assets.

The trade credit settlements are scheduled for the business day after the transaction date and will incur a financing fee calculated as 11% plus the federal funds target rate, divided by 365 days. For instance, if the federal funds target rate was 5.50% on November 20, 2023, the financing fee would be calculated as 11% + 5.5%, divided by 365, on the borrowed amount.

ETF analyst Eric Balchunas commented on these developments, highlighting their significance in the ETF industry.

Eyeballing it a bit now. This section on the Trade Credit Lender is much longer in new version. (I think) this is exclusive to BlackRock’s filing. pic.twitter.com/gBy0u0775D — Eric Balchunas (@EricBalchunas) December 5, 2023

BlackRock, a pioneering institution in the financial sector, submitted its application for a spot Bitcoin ETF in July and is among 13 applicants awaiting the SEC's decision. Despite previous rejections of spot BTC ETF applications by the SEC, industry experts anticipate the approval of the first spot BTC ETF in the United States by early 2024.