BlackRock Modifies Custody Agreement with Coinbase for Bitcoin ETF

BlackRock has amended its custody agreement with Coinbase, updating the operating procedures for its iShares Bitcoin Trust ETF. According to a filing with the Securities and Exchange Commission on September 16th, revisions to the Coinbase Prime Brokerage Agreement introduce changes aimed at improving the withdrawal process and asset management during unsettled trades.

These modifications reduce the time Coinbase Custody takes to process withdrawals from the Vault Balance to public blockchain addresses (while trade credit is yet to be settled). The agreement also allows the trust to withdraw funds from the Vault Balance or Trading Balance to a public blockchain address, provided that an amount equivalent to the outstanding trade credit remains in the total balance after the withdrawal.

As per the SEC filing, this amendment updates Section 2.1 of the "Custody Services Agreement." Coinbase Custody must now process withdrawals of digital assets to public blockchain addresses within 12 hours of receiving instructions from the trust or its authorized representative, subject to specific balance requirements.

This development comes amid recent accusations against Coinbase alleging that the exchange did not use BlackRock's funds to purchase actual Bitcoin for the ETF. Social media rumors suggested that Coinbase was issuing debt notes instead of using Bitcoin to back the ETF, and using BlackRock's funds to manipulate Bitcoin's price. These contract updates may also address regulatory expectations and best operating practices, focusing on reducing withdrawal processing times and ensuring asset availability during unsettled trades.