BlackRock recently filed an amendment for its Bitcoin exchange-traded fund (ETF) application in response to growing investors’ concerns about Coinbase’s onchain settlement processes.

According to a filing with the Securities and Exchange Commission (SEC) on September 16, BlackRock now requires Coinbase, the custodian for the ETF, to process Bitcoin withdrawals within 12 hours of receiving an instruction.

Investors have asked Coinbase to produce onchain verification of Bitcoin purchases on behalf of spot ETFs. Coinbase is the custodian for 10 out of 11 top Bitcoin ETFs and eight of nine newly approved Ether (ETH) ETFs in the United States. Despite the recent institutional inflows from Bitcoin ETFs, BTC prices have remained flat for the previous three months.

There are fears that Coinbase might acquire “paper BTC,” or Bitcoin IOUs, which could artificially suppress the actual Bitcoin price. These concerns have been fueled by Bitcoin’s stagnating price over the last few months, despite the influx of institutional investments through these ETFs.

Brian Armstrong, the CEO of Coinbase, said that all ETF-related transactions are indeed settled on-chain, even though Coinbase does not publicly disclose all ETF addresses.

On September 14, Armstrong also wrote in X post that Coinbase is audited annually by Deloitte, emphasizing its status as a public company. He added, “I doubt our institutional clients want people dusting all their addresses, and it’s not our place to share for them. This is what it looks like if you want a bunch of institutional money to flow into Bitcoin.”

Investor fears began to escalate in August when Coinbase initially teased the creation of a new Wrapped Bitcoin (WBTC), named Coinbase BTC (cbBTC).

Despite the fears surrounding Coinbase’s practices, ETF analyst Eric Balchunas from Bloomberg argued that the ETFs themselves are not to blame for Bitcoin’s recent price slump.

Since their introduction earlier this year, Bitcoin ETFs have amassed significant on-chain holdings, totaling over $59 billion, according to data from Dune Analytics. BlackRock’s IBIT remains the largest of these ETFs, holding over $22.5 billion in assets, which accounts for more than 38% of the market share.

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