BlackRock may plan to get involved in Bitcoin, two filings made by the firm with the Security and Exchange Commission (SEC) suggest.
The world's leading asset manager, counting $7.43 trillion in assets under management at the end of 2019, filed two Statements of Additional Information (SAI) on Wednesday for the BlackRock Funds V and the BlackRock Global Allocation fund.
An SAI is a supplementary document to a fund's prospectus that includes additional information about the fund's operations. While the SAIs are dated April and February last year, respectively, the addition of Bitcoin appears to be new.
The filings indicate that the asset manager is looking to enter the Bitcoin futures market, as they read that "Certain Funds may engage in futures contracts based on bitcoin." The filings elaborate:
Bitcoin is a digital asset whose ownership and behavior are determined by participants in an online, peer-to-peer network that connects computers that run publicly accessible, or “open source," software that follows the rules and procedures governing the bitcoin network, commonly referred to as the bitcoin protocol.
Futures trading allows a fund to "increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than with other transactions," the filing further states. The only futures BlackRack intends to invest in are "cash-settled bitcoin futures traded on commodity exchanges registered with the CFTC."
However, changes in the regulatory landscape surrounding Bitcoin are to be anticipated, the firm states in the filings: "Regulatory changes or actions may alter the nature of an investment in bitcoin futures or restrict the use of bitcoin or the operations of the bitcoin network or exchanges on which bitcoin trades in a manner that adversely affects the price of bitcoin futures, which could adversely impact a Fund."
The filings further mention the risk of illiquidity that "bitcoin futures may involve," citing that "bitcoin futures are not as heavily traded as other futures given that the bitcoin futures market is relatively new."
While the filings are not a confirmation that BlackRock's entities are going to buy Bitcoin futures, these types of filings often precede ventures into the space and, at the very least, help pave the way for BlackRock's funds to add exposure in the future.
In November last year, Rieder stated that he believes "Bitcoin is here to stay," and that it may "take the place of gold to a large extent [...] because it's so much more functional than passing a bar of gold around."
Following up a week later, Fink said that "Bitcoin has caught the attention and the imagination of many people. Still untested, pretty small market relative to other markets."
Fink was further quoted saying, "these big giant moves every day…it’s a thin market. Can it evolve into a global market? Possibly."