Today it seems I might not be completely right, BlackRock now requires Coin base to deposit Bitcoin directly on-chain within 12hrs of instruction after concerns were been raised that Coinbase is selling "paper BTC" to ETFs.
I believe it is more like a fud attempt than a news about truth.
Bitcoin Spot ETFs were designed that ETF companies will have to use customer capital, and they must buy bitcoin first with equivalent value of ETF shares that they will mint later.
Most of Bitcoin Spot ETFs have their custodians is Coinbase
[1] and months ago, it raises big concern on Coinbase factor here. If anything goes wrong with Coinbase, you know what will happen.
[1] https://blockworks.co/bitcoin-etfRisk from management of that Bitcoin Spot ETF.
Risk from the custodial entity, here most Bitcoin Spot ETFs choose Coinbase.