‘Paper Bitcoin’ allegations mobilised BlackRock: Change request to Coinbase

The allegations spread on social media last week that Coinbase does not hold real Bitcoin on behalf of BlackRock do not seem to have convinced BlackRock despite the trust environment provided. The world’s largest asset manager requested an amendment to its ETF/BTC custody agreement with Coinbase yesterday evening. If the amendment is approved, Coinbase will now have to make Bitcoin withdrawals requested by BlackRock to an open address. Transactions will also have to be completed within 12 hours.

‘Paper Bitcoin’ allegations mobilised BlackRock: Change request to Coinbase

With more than $10 trillion in assets under management, BlackRock, the world’s largest in this sense, once again showed how much importance it attaches to customer trust. BlackRock took an important step after last week’s allegations that ‘Coinbase does not hold real BTC on behalf of BlackRock’.

The company amended its ETF custody agreement with Coinbase. According to BlackRock’s new request, Coinbase will now be required to complete the withdrawals within 12 hours. The withdrawals will be made through an open address to avoid controversy.

BlackRock’s request included the following statements:

‘Coinbase Custody will ensure that digital assets are withdrawn from the custody account to an open blockchain address within 12 hours of receiving an instruction from the customer or the customer’s authorised representatives’

What happened?

As it will be remembered, last week, allegations that Coinbase was holding debt certificate (documents), also known as IOU, instead of real BTC on behalf of BlackRock’s IBIT ETF, appeared on social media. The claim that ‘Coinbase holds paper Bitcoin, not real Bitcoin’ was denied and refuted by many experts, especially Coinbase executives. However, with this move, BlackRock has also shown that it will not take any risks.

Coinbase, which carries out the custody services of most issuers in both Bitcoin and Ether ETFs, has long been under pressure from the public for ‘proof of reserve’.

In these allegations last week, Coinbase CEO Brian Armstrong said that they are audited every year by Deloitte, one of the world’s largest audit companies, and stated that customers do not need to have any doubts about this issue.

Eric Balchunas: These are not amateur companies

Eric Balchunas, an ETF expert, was not indifferent to the issue. Stating that BlackRock-style companies are very professional and will not do any amateurism, Balchunas said:

“There are a lot of questions about this issue. Let’s give a little more detail then… BlackRock runs its own blockchain node and receives balance information from its wallets on Coinbase Prime to verify the number of BTC standing in the IBIT fund every evening. Probably now, if there is a demand, they will show this to their institutional investors, but I don’t think they will show it openly to the whole world. Because they get a lot of spam about it (such as banned Bitcoin or NFTs)… If they show it openly, this situation will get out of hand. Look, BlackRock and other ETF issuers are not amateurs. BlackRock has more than 500 ETFs. They have been working with many custodians for decades without any problems. That’s why all of America’s investment advisors trust these companies. These advisors know that nothing like the FTX-SBF incident will happen to them.”

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