BlackRock, a prominent player in traditional finance and a key participant in the crypto industry, has expressed concerns about potential risks associated with stablecoins in relation to its proposed iShares Bitcoin spot exchange-traded fund (ETF). Despite BlackRock’s active pursuit of a Bitcoin spot ETF and its registration of an Ethereum trust, the company now highlights the potential impact of stablecoin price fluctuations on the ETF’s performance.
BlackRock specifically points out the potential instability of stablecoins like Tether USD (USDT) and Circle USD (USDC), designed to maintain a value equivalent to a specific asset or currency, typically the US dollar. The asset manager underscores that past events involving Tether and USDC have demonstrated significant price movements, influencing the value of Bitcoin. Legal actions against Tether’s operators in February and October 2021, as well as a deviation in USDC’s peg on March 10, 2023, raised concerns about the stability and reliability of stablecoins.
BlackRock states, “While the Trust does not invest in stablecoins, it may nonetheless be exposed to the risks that stablecoins pose for the bitcoin market and other digital asset markets.”
In its filing for a Spot Bitcoin ETF, BlackRock discloses exposure to stablecoins like Tether USD (USDT) and Circle USD (USDC) as a risk factor. While the ETF does not directly invest in stablecoins, the document emphasises the potential impact of stablecoin volatility on Bitcoin’s price and, consequently, the ETF’s performance. BlackRock highlights the foundational role of stablecoins in the broader digital asset market, emphasising the risks associated with disorderly de-pegging or a run on stablecoins.
The disclosure by BlackRock is a notable development, considering its status as the largest asset manager globally.
BlackRock concludes that indirect exposure to stablecoins could pose substantial risks to investors in its Bitcoin ETF. The concerns encompass potential volatility, operational challenges, manipulative practices, and regulatory issues associated with stablecoins. This disclosure underscores the evolving and complex nature of risks in the cryptocurrency market, emphasising the importance of investor awareness regarding the underlying assets of financial products tied to digital currencies.