BlackRock confirmed that the Canadian Arm has granted securities lending for iShares Bitcoin ETF from August 25th after providing investors with the required 60-day notice.
The move follows the disclosure of the June 26 prospectus, which outlined how funds could engage in loan transactions in accordance with the Canadian Securities Act. The decision is consistent with other iShares ETFs in Canada, many of which already rely on lending securities to generate income.
Securities lending allows the fund to lend holdings such as stocks and other securities to borrowers, or typically financial institutions, in exchange for collateral and loan fees.
Borrowers use these securities to cover settlement gaps, meet collateral requirements, and support short-term strategies.
By opening IBIT in securities lending, BlackRock emphasizes that protections are in place to effectively expand the revenue streams of ETFs and mitigate risk.
BlackRock launched its Bitcoin product in the Canadian market in January. The fund allows investors to be exposed to flagship digital assets in the Canadian and US dollars. It manages approximately $358.9 million (equivalent to US$257 million).
IBIT Securities Loan Program
According to the prospectus, BlackRock Canada has appointed two affiliates as lending agents for funds, including San Francisco-based BlackRock Institute Trust Company (BTC) and London-based BlackRock Advisor (UK) Limited (BAL).
Under this structure, borrowers must post collateral worth at least 102% of the market value of the lending securities. The collateral may take the form of cash or other securities.
BlackRock also promises to replace securities that are not returned in the event of a borrower’s failure and offers default compensation for the borrower.
To limit exposure, it is possible that less than 50% of the fund’s net asset value is available for loan at any time. Cash collateral can only be invested in highly liquid securities with maturities of up to 90 days, if received.
The program is supported by BlackRock’s internal risk management team, which uses proprietary technology and quantitative models to monitor exposure. The company emphasizes quality, liquidity and interest rate sensitivity when investing in cash collateral, reflecting an approach designed to prevent market disruption.
Risk and Investor Protection
Despite the safeguards, securities lending introduces risks that could affect holders.
Some of these include delays from borrowers or failure to return securities, which could prevent ETFs from participating in corporate measures such as mergers and dividends.
Market conditions also led lending agents to reduce their activity, reducing potential revenues. Additionally, changes in tax or regulatory rules may change the handling of loaned securities and change the delay or reduction in payments due to the fund.
Still, BlackRock emphasizes that over 100% collateralization and its compensation arrangements reduce the likelihood of investors losing money. This policy ensures that even if borrowers are defaulted, BlackRock allows them to restore their portfolios without material impact.