Bitwise, the world’s largest crypto index fund manager, has seen an inflow of almost 1 million Sats just a few days after going public with its Bitcoin custody address. The investment manager’s transparency echoed loudly beyond the industry after it became the first ETF issuer to publish its custody address and other vital details. Fans and well-meaning Bitcoin owners have been sending BTC to the wallet and don’t seem to be slowing down.
Curiosity Peaks: Industry Leaders and Investors Question Destiny of Donations to Bitwise’s Wallet
There have been over 998,085 Sats, an equivalent of 419 USD, from 35 crypto outflow transactions to the trust’s Bitcoin address as more are expected to come. While the amount is infinitesimal compared to the $511 million of BITB’s assets under management, it comes off as a precursor to greater events in the Bitcoin ETF ecosystem.
As expected, questions have begun to arise, with industry leaders and investors looking to know how the donations would be utilized. Bitwise’s management already seemed to have foreseen the need for a transparent plan to utilize such inflows and was swift to let everyone in on how the funds would be distributed.
When approached on the issue, Bitwise CEO Matt Hougan said “All assets accrue to the benefit of shareholders of BITB”. The company’s form S-1 already said that inflows of “involuntary assets” would be sold for cash to be shared proportionally among all BITB shareholders.
Concerns Emerge Regarding OFAC Sanctioned Wallets and Potential Dusting Attacks
With the advent of sending crypto donations to the new Bitcoin ETF came another fear. OFAC-sanctioned wallets may also send Sats to the address with malicious intent, including dusting attacks.
OFAC (Office of Foreign Assets Control) – an arm of the US Treasury Department – uses sanctions to fight against criminal actors abusing crypto and other digital assets. If Bitwise begins receiving BTC from OFAC-sanctioned addresses, the most intuitive expectation is scrutiny of Bitwise’s transactions and possible grapples with regulators.
The fears are valid, considering that in 2022, OFAC-sanctioned Tornado Cash targeted 600 wallet addresses in a mammoth dusting attack, sending them 0.1 ETH each, according to Blockchain security company PeckShield.
Hong Kim, co-founder and CTO of Bitwise Invest has dissolved such fears, saying that Coinbase Custody will flag any Satoshi inflows from such OFAC-sanctioned addresses and they will not be added to the NAV (Net Asset Value).
Kim also stated that dust transactions are no big deal for an institutional Custodian like Coinbase Custody. He categorically said that the notion of attacking a public Bitcoin address by sending it dust or free sats “doesn’t hold truth”.
There are also other micro-regulatory areas being dug up by analysts, such as how to sieve out transfers from addresses that have not completed their KYC (Know Your Customer) requirements. The focal point here is how the SEC may react to a potential mix-up of non-KYC coins in the ETF issuer’s NAV. While we’ve yet to see inquisitions into the donations by the SEC, the recent string of events around BITB are quite suspenseful and seem like the advent of a transparent ETF revolution.