BlackRock Bitcoin ETF: Is the new financial product at risk of a kill switch?

BlackRock Bitcoin ETF: Is the new financial product at risk of a kill switch?

According to a report by de.beincrypto.com,

The hype surrounding BlackRock's Bitcoin Spot ETF is in full swing and the BTC price is chasing one new annual high after another. But now the crypto community is worried about a potential backdoor, a “kill switch” from the US Securities and Exchange Commission (SEC) so that the new financial product can be taken off the market at any time. In the wealth giant's latest amendment, a new clause caught the attention of some experts. As lawyer Joe Carlasare explained, the document contains new wording that could have potentially fatal consequences for the ETF.

In an X post, Joe Carlasare highlighted a significant adjustment to BlackRock's S-1 filing. According to this, the spot ETF may be at risk of extinction if Bitcoin is ever classified as a security. BlackRock's filing states: "If a digital asset is classified or claimed to be a security, it is likely that it will be difficult or impossible for the digital asset to be traded, settled, or held in custody in the United States through the same channels used for non-secure digital assets." After a section referencing the litigation between Ripple and the SEC, it continues: “If Bitcoin is classified as a security, the Trust could also be considered an unregistered “investment company” under SEC rules, which could require the Trust to be dissolved.”

The change does not imply that the SEC will crack down even after the ETF is approved. Rather, it is a safeguard and a legally necessary step to get closer to the approval of the ETF. As the lawyer explained in the discussion surrounding the tweet, BlackRock must communicate this possibility to its clients in the risk warning. This is the reason why BlackRock changed this section in the application for the Bitcoin ETF. Independent sources reportedly confirmed this information.

Despite the potential risks of a kill switch, Carlasare remains calm - but kindly warns the crypto community about it. The BTC price was also not very impressed by the kill switch. A few hours ago, the price reached a new annual high of around $44,000, but has corrected somewhat since then.

My analysis of the situation shows that the SEC's potential designation of Bitcoin as a security could have a significant impact on the market and the financial industry. If this were to occur, the BlackRock Bitcoin ETF would potentially be at risk and could be delisted from the market. This would lead to considerable uncertainty in the crypto community and influence the BTC price.

However, it remains to be seen how the SEC will actually act and whether the ETF will ultimately be approved. The uncertainty surrounding the kill switch could cause short-term market volatility. It is therefore advisable to monitor developments closely and be prepared for possible market reactions.