By Nermeen Nabil 
The recent development in BTC withdrawals has captured the attention of crypto users. BlackRock submitted an essential amendment to its physically-backed Bitcoin ETF.
The new amendment is that Bitcoin withdrawals must be processed within 12 hours. Continue reading to understand what this means for everyone.
What’s the Big Deal?
On September 16th, BlackRock filed form amendment S-8 with the United States Securities and Exchange Commission (SEC). With this amendment, Coinbase, the custodian, must complete the transaction within 12 hours when an investor asks to withdraw Bitcoin from the ETF.
This was after some investors expressed concerns about how Coinbase handles the Bitcoin it holds for these ETFs. There was increasing concern that Coinbase could trade in ‘paper BTC,’ or IOUs, instead of the real Bitcoin. This increased doubts about the authenticity of Bitcoin and, thus, its price. However, BlackRock seeks to calm the investors, telling them they can redeem Bitcoins on the blockchain within a given time.
JUST IN: BlackRock has updated its #Bitcoin ETF custody agreement with Coinbase to require withdrawals to be processed within 12 hours of notice. pic.twitter.com/0JdNsftG3u
— Financial Index (@financial_index) September 23, 2024
What Did Coinbase Say?
Coinbase is the corresponding custody for many Bitcoin and Ether ETFs in the U.S. Brian Armstrong, Coinbase’s CEO, stated that they process all transactions on the blockchain. He said investors should since nobody will try to mess with their bitcoins. Armstrong also emphasized that Coinbase is a publicly traded company. He clarified that the Bitcoin for these ETFs is real and accounted for. Also, the company doesn’t reveal all the addresses holding these Bitcoins for security reasons.
Baldilocks here.
Not sure what this is all about TBH. All ETF mints and burns we process are ultimately settled onchain. Institutional clients have trade financing and OTC options before trades are settled onchain. This is the norm for all our institutional clients. All funds…
— Brian Armstrong (@brian_armstrong) September 14, 2024
What Prompted the Concern?
These investor worries intensified when Coinbase mentioned it might be developing a new product. This product will be “Coinbase BTC” or cbBTC, a form of Wrapped Bitcoin (wBTC). Wrapped Bitcoin is a valuable token on different blockchains. It raised questions about whether Coinbase had enough actual Bitcoin to back all the ETFs.
Bitcoin prices have been stagnant for months, which some thought could be due to Coinbase holding onto Bitcoin in ways that didn’t reflect its market value.
BIG BREAKING
BlackRock amended its spot #Bitcoin ETF custody agreement with Coinbase to improve withdrawal times. pic.twitter.com/rQS9llMj94
— BITCOINLFG® (@bitcoinlfgo) September 23, 2024
Are Bitcoin ETFs to Blame for the Price Slump?
To curb this perception, some analysts like Eric Balchunas from Bloomberg have attempted to explain this. He also excluded BlackRock or other ETF issuers from blaming for the recent falling Bitcoin price.
Instead, it seems that holders of native Bitcoin have been cashing out in the long term. If that’s the case, massive sales contribute to the price drop. ETFs keep Bitcoin’s price from falling even further, with data showing that ETFs now hold billions as on-chain Bitcoin.
I get why these theories exist and ppl want to scepegoat the ETFs. Bc it is too unthinkable that the native HODLers could be the sellers. But they are. The call is coming from inside the house. All the ETFs and BlackRock have done is save btc’s price from the abyss repeatedly.
— Eric Balchunas (@EricBalchunas) September 14, 2024
Conclusion
The new amendment wants to process Bitcoin withdrawals in 12-hour batches. This is to restore investors’ losses and bring transparency. These concerns raised some eyebrows about Coinbase’s practices, but they and BlackRock gave investors a thumbs up.
Disclaimer
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Nermeen Nabil Khear