Coinbase's Reassurance

Coinbase has reassured that all ETF-related transactions settle on-chain within one business day. This move comes amid rising investor concerns about the transparency of Bitcoin ETF transactions.

Coinbase CEO Brian Armstrong stated, "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 are settled in our Prime vaults (onchain) within about one business day."

BlackRock's Amendment

BlackRock, the world's largest asset manager, is seeking to amend its Bitcoin ETF (IBIT). Since launching on January 11, this ETF has been the top performer among its peers.

In a filing with the US Securities and Exchange Commission (SEC), BlackRock requested that Bitcoin withdrawals from Coinbase, which acts as custodian for the asset manager's IBIT, be processed within 12 hours.

"Subject to confirmation of the foregoing required minimum balance, Coinbase Custody shall process a withdrawal of Digital Assets from the Custodial Account to a public blockchain address within 12 hours of obtaining an Instruction from Client or Client's Authorized Representatives," an excerpt in the filing read.

Investor Concerns

Investors have raised concerns about Coinbase's custodial practices for Bitcoin ETFs. Specifically, they want Coinbase, as custodian, to provide on-chain proof of Bitcoin purchases for ETFs to ensure transparency.

These concerns have arisen due to Bitcoin's stagnant price performance over the past three months despite large inflows into Bitcoin ETFs.

Coinbase might use 'paper BTC' or Bitcoin IOUs for ETF issuers, potentially contributing to the lackluster price movement.

'It doesn't bode well that nearly all crypto ETF issuers have the same custodian for all their BTC and ETH. This makes Coinbase a potential single point of failure, and that's scary,' said Fox Business reporter Eleanor Terrett.

Enhancing Transparency

BlackRock's recent move to amend its Bitcoin ETF aims to address these concerns. The modifications suggest the asset manager's efforts to enhance operational frameworks while improving liquidity.

ETF analyst Eric Balchunas minimized the speculation, stating, 'I get why these theories exist. People want to scapegoat the ETFs because it is too unthinkable that the native HODLers could be the sellers.

But they are... All the ETFs and BlackRock have done is repeatedly save BTC's price from the abyss.'

Dominance in the Market

Bitcoin ETF inflows have been massive since the financial instrument hit markets on January 11. Dune data shows that BlackRock's IBIT dominates the sector, holding over 38% of the market share and managing $22.5 billion in on-chain assets.

Coinbase dominates the crypto spot ETFs market, providing custody services for eight 11 Bitcoin ETFs and eight Ethereum ETFs. It also offers trading execution and market surveillance services.

Despite concerns about its position as a potential single point of failure, Coinbase plays a critical role in institutional Bitcoin investment.