December 12, 2023

BlackRock Issues Warning to SEC: Designating Bitcoin as a Security Could Disrupt Trading and Depress Its Value

BlackRock has cautioned the U.S. Securities and Exchange Commission (SEC) against classifying bitcoin as a security, emphasizing potential disruptions to trading and a decrease in its value, drawing parallels with Ripple's legal challenges.

BlackRock, the world's leading asset manager and a key contender in the race for a spot exchange-traded fund (ETF), has expressed concerns about the repercussions of the U.S. Securities and Exchange Commission (SEC) classifying bitcoin as a security.

The firm highlighted this apprehension in an amendment to its ETF filing, stating:

"If a digital asset is determined or asserted to be a security, it is likely to become difficult or impossible for the digital asset to be traded, cleared or custodied in the United States through the same channels used by non‑security digital assets."

Additionally, BlackRock warned that any enforcement action could adversely impact the digital asset's value.

"Any enforcement action by the SEC or a state securities regulator asserting that bitcoin is a security or a court decision to that effect would be expected to have an immediate material adverse impact on the trading value of bitcoin, as well as the (spot ETF) shares."

Referring to the SEC's legal action against Ripple, BlackRock highlighted the impact on XRP's trading value. Prior to the lawsuit, the firm noted that XRP's market capitalization occasionally exceeded $100 billion. "However, in the weeks following the SEC’s complaint, XRP’s market capitalization fell to less than $10 billion," stated the asset manager.

This recent development follows earlier speculations suggesting that the SEC might be considering classifying bitcoin as a security, with discussions around an ETF taking center stage. The crypto community anticipates the regulator's potential approval as early as January 2024.

Meanwhile, BlackRock's concerns align with complaints voiced by Ripple executives regarding the repercussions of the legal action on their business. The blockchain company reported losing partnerships in the United States and abroad, accompanied by a significant drop and stagnation in XRP's price. Currently, bitcoin (BTC) and ether (ETH) appear to be the two cryptocurrencies avoiding classification as securities.

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