BlackRock applied to launch a bitcoin fund. Then came the conspiracy theories.

• Crypto influencers seized on BlackRock's application to launch a bitcoin exchange-traded fund.

• Some said it sends a bullish sign to the wider crypto market; others spread conspiracy theories.

• The attention underscores the relatively new scrutiny BlackRock faces in the mainstream.

There are exceptional and very ordinary aspects of the application BlackRock filed with the US Securities and Exchange Commission last week to launch a exchange-traded fund that would track the price of bitcoin.

BlackRock is a fund manager. It creates, manages, and distributes funds. It has 1,300 ETFs! This is literally what it does! And investors knew about the partnership BlackRock struck last year with Coinbase, the crypto exchange BlackRock said it would use as a bitcoin custodian on behalf of the iShares Bitcoin Trust if regulators approve it.

The effort to launch a spot bitcoin ETF, though, is a meaningful development in cryptoland. "The future of crypto is more BlackRock and less Binance," Matt Hougan, chief investment officer of Bitwise Asset Management, tweeted, and Galaxy Digital CEO Michael Novogratz tweeted that BlackRock launching a bitcoin ETF "would be the best thing that could happen" to bitcoin.

Wall Street's top regulator has so far rejected other, smaller asset managers' applications to launch similar vehicles. The crypto money manager Grayscale even sued the SEC last year after it tossed out Grayscale's application to turn a bitcoin trust into a spot bitcoin ETF.

And a renewed commitment between the world's largest asset manager and Coinbase, which the SEC accused of violating securities laws earlier this month, may give the crypto company a reputational boost. (Coinbase CEO Brian Armstrong said in a tweet on June 6 that "the complaint filed against us is exclusively focused on what is or is not a security," and that "we are confident in our facts and the law.")

I've covered BlackRock's path to embracing crypto. Here's part of my inside story with Morgan Chittum from last fall, below, and here's a separate rundown of the BlackRock employees involved in crypto initiatives at the firm.

But even as crypto enthusiasts found advocates internally, people left. There was a "line in BlackRock to do the fun work" of working on digital assets or blockchain research full time, another former employee said. 

It "looked impossible for BlackRock to do anything" significant in the space in the near term, the person said. "That's why I think many of us left."

BlackRock is now working on its partnerships with Coinbase and Circle and focusing on the four parts of its crypto strategy: stablecoins, tokenization, permissioned blockchains, and crypto assets. 

BlackRock leadership is highlighting those efforts. While acknowledging the "steep downturn" in crypto assets, Fink said on an earnings conference call this summer that the firm was still seeing "more interest from institutional clients about how to efficiently access these assets."

The price of bitcoin has rallied near its highest level of 2023 in the days since BlackRock filed its application, eclipsing $30,000 on Wednesday. Potential implications for the wider digital assets ecosystem aside, it's worth examining other reactions to the application.

Crypto influencers have seized on BlackRock's new crypto efforts, underscoring the relatively new scrutiny BlackRock faces from the everyday investors and the general public. Enter the outlandish comments about BlackRock's position in the crypto market, another front in the scrutiny around the firm.

"So BlackRock, Citadel, Deutsche Bank and NASDAQ have all started to enter the crypto space in the last week. They've bullied out participants so they can scoop up cheap coins. The trajectory for crypto has never been more clear," one venture capitalist wrote to his 197,000 followers.

A business podcast host tweeted to his 903,000 followers: "They're not trying to kill crypto. They're trying to kill the current crypto industry and then hand it over to their cronies. Citadel, BlackRock, Schwab JPMorgan…" (These tweets refer to Citadel, the hedge fund founded and led by billionaire Ken Griffin. But it is market maker Citadel Securities, also founded by Griffin, that backed a recently launched crypto exchange called EDX.) 

A BlackRock spokesperson declined to comment.

Of course, the firm's sheer size has long been the subject of criticism from regulators and officials who take issue with its dominance in the ETF market. But the ESG investing-related scrutiny that ramped up last year has brought a new awareness of BlackRock to the mainstream. That's pushed BlackRock to get ahead of theories and videos that spread widely online; I spoke with Rich Latour, the firm's global head of content and media about that a year ago.

"We've certainly done research, and we know that there's a perception that a lot is going on in BlackRock that people don't necessarily understand," Latour said last June.

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