BlackRock Warns Classifying Bitcoin as ‘Security’ Would Negatively Affect Its Value

• BlackRock warned that classifying Bitcoin as a security would affect its trading value and ETF shares. 
• The firm cautioned that an enforcement action would negatively affect Bitcoin’s value and adoption. 
• BlackRock noted that XRP’s $100 billion market cap was reduced to $10 billion after the SEC started a lawsuit against Ripple.

BlackRock, the world’s largest asset manager and one of the forerunners in the spot Bitcoin exchange-traded fund (ETF) race, has warned about the consequences of the U.S. Securities and Exchange Commission’s (SEC) classification of Bitcoin as a security.

The firm noted this concern in an update to its ETF filing, where it said, “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.”

Furthermore, BlackRock cautioned that an enforcement action would have a negative effect on 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 bitcoin ETF) shares.”

Pointing to the SEC lawsuit against Ripple, BlackRock noted the effect of the action on XRP’s trading value. Before the lawsuit, the firm remarked that XRP’s market capitalization sometimes reached over $100 billion. “However, in the weeks following the SEC’s complaint, XRP’s market capitalization fell to less than $10 billion,” the asset manager stated. 

The recent development follows earlier speculations that the Wall Street regulator may be looking to classify Bitcoin as a security as conversations around an ETF continue to take center stage. Importantly, crypto community members anticipate that the regulator will give its approval as early as January 2024.

Meanwhile, BlackRock’s concern mirrors complaints raised by Ripple executives about the impact of the action on their business. According to the blockchain company, it lost out on partnerships in the United States and outside. At the same time, XRP’s price plummeted and has stagnated. So far, Bitcoin and Ethereum are the two cryptocurrencies that appear to be spared from being classified as securities.

However, that exclusion has not gone unnoticed, especially as the SEC goes after other crypto networks. Cardano’s founder, Charles Hoskinson, was the latest crypto executive to voice his frustration with the SEC’s treatment of Bitcoin and Ethereum.