News
Advisors Are Cautious With Bitcoin ETF Adoption: BlackRock Executive
Samara Cohen, head of ETF and index investing at BlackRock, hinted that financial advisors remain “wary” of adopting spot Bitcoin (Bitcoin) exchange-traded funds (ETFs) despite the investment vehicle’s success.
Despite attracting more than $50 billion in investments since launching in January 2024, Bitcoin ETFs still face slow uptake among financial advisors.
Second according to Cohen, about 80% of Bitcoin ETF purchases come from self-directed investors who made their allocation through an online brokerage account.
Cohen stressed that financial advisors remain cautious about joining the Bitcoin spot ETF bandwagon due to their fiduciary responsibilities to clients.
Given Bitcoin’s history of significant price volatility, advisors are rigorously analyzing its role in portfolios and determining appropriate allocations based on investors’ risk tolerance and liquidity needs.
He emphasized that this process of data evaluation and risk analysis is critical for advisors to carry out their duties effectively amid ongoing market uncertainties.
The flagship cryptocurrency has undergone significant fluctuations over time, posing a substantial risk to potential investors. Additionally, the relatively short history of Bitcoin ETFs contributes to financial advisors’ skepticism, as the limited track record raises questions about their reliability and long-term performance, he notes.
Another significant deterrent is the regulatory landscape. The financial industry continues to grapple with creating a clear regulatory framework for cryptocurrencies, which introduces uncertainty and caution among financial advisors. The absence of definitive guidelines and the possibility of regulatory adjustments further complicates the recommendation of Bitcoin ETFs to clients.
Despite these challenges, Bitcoin ETFs promise to serve as a conduit between cryptocurrency and conventional finance. They offer investors a regulated and more accessible way to participate in the cryptocurrency market.
However, the slow acceptance among financial advisors highlights the need for greater education and awareness to overcome existing barriers.
Regulatory changes
The approval of Bitcoin ETFs by the US Securities and Exchange Commission (SEC) has had a profound impact impact on the cryptocurrency market, especially with broadcasters such as ARK and 21Shares.
Major issuers who have backed the Bitcoin ETF approvals they are now trying the same for Ethereum (ET). This development has caught the attention of investors seeking exposure to the second-largest cryptocurrency by market capitalization.
However, the SEC expressed caution amid this enthusiasm. SEC Chairman Gary Gensler pointed out that most cryptocurrencies are viewed as investment contracts and therefore fall within the scope federal securities laws.
This position deviates from the SEC’s previous approach, which focused primarily on the commodity and futures aspects of cryptocurrencies.
This regulatory classification adds complexity to the approval process for Ethereum ETFs, which operate on a different protocol than Bitcoin.
Anyway, Gensler expects fully approve Ether spot ETFs by the end of summer 2024.
The SEC had previously given the initials approval to a group of ETFs, and the final registration requirements, known as S-1 filings, are currently being processed at the staff level. Once these documents receive approval, the new ETFs can be listed, providing the market with easy-to-trade funds that hold actual Ether, similar to the previously established Bitcoin spot ETFs.
During a budget hearing before the Senate Appropriations Committee, Gensler highlighted the smooth running of the registration process of these ETFs. He noted that individual issuers are diligently progressing through the registration phases, proceeding efficiently.