• US Bitcoin ETFs have received significant reception in the US following their January 10 approval.  
  • After a successful month with these investment products in the market, sidelined banks now want part of the action.
  • Banks are pushing the SEC for less expensive terms to hold digital assets for customers.

The US Securities & Exchange Commission (SEC) approved multiple spot Bitcoin exchange-traded funds (ETF) applications in a landmark decision on January 10. With BTC now trading on Wall Street, the investment product has garnered significant support, causing sidelined financial institutions to rise up in arms for their own portion of the cake.

Also Read: Gold ETFs bleed $2.4B so far this year as Bitcoin ETFs hit record volumes

US banks petition the SEC over Bitcoin ETF inclusion

Some banks in the US have joined hands to appeal to the SEC for friendlier guidance about holding digital assets for their customers. According to a Bloomberg report, a bank trade group coalition, with strong interest in the matter, sent a letter to the financial regulator seeking the exclusion of ETFs from the broad cryptocurrency umbrella.

The coalition features the likes of the “Bank Policy Institute, the American Bankers Association, the Securities Industry and Financial Markets Association, and Financial Services Forum,” Bloomberg reports.  

Based on the report, the banks feel the standing guidance makes digital asset holding quite expensive, compelling them to watch from the fences. The interest groups join Democrats and Republicans in Congress who are already pushing for a revision of the guidelines.

Digital asset guidelines make banks feel sidelined

The standing guidelines stipulate that when public companies custody crypto, they should consider cryptocurrency as part of the liabilities on their corporate balance sheets. With banks listed among public companies, it means that they have to allocate assets of the same value as a hedge so that customers are protected against losses. This is the only way they can remain in compliance with their capital requirements.

In contention, the SEC challenges that there are more distinct risks around crypto than what is seen among other assets that banks custody for clients.

Meanwhile, the allure of BTC ETFs grows by the day with reports indicating that this investment class is proving to be more attractive than Gold. Specifically, as BTC topped $1 trillion in market value, Gold ETFs dumped in favor of crypto.

Reports also show that since the start of the year, more than $3 billion worth of Gold ETFs have been dumped. All signs point to a rotation into Bitcoin ETFs, which are 1/13th the sizeof the Gold ETF market. While it took BTC ETFs just one month to achieve this milestone, Gold ETFs took up to two years.

This explains why BlackRock executive Larry Fink recently said, “BTC is no different than what Gold was for thousands of years.” 

FXStreet recently reported on the regional specificity of BTC ETF demand as Chinese, European and Canadian investors draw toward the US ETF market.

Also Read: Bitcoin price shows strength as US BTC ETF flow percentage beats AUM in most regions

Crypto ETF FAQs

What is an ETF?

An Exchange-Traded Fund (ETF) is an investment vehicle or an index that tracks the price of an underlying asset. ETFs can not only track a single asset, but a group of assets and sectors. For example, a Bitcoin ETF tracks Bitcoin’s price. ETF is a tool used by investors to gain exposure to a certain asset.

Is Bitcoin futures ETF approved?

Yes. The first Bitcoin futures ETF in the US was approved by the US Securities & Exchange Commission in October 2021. A total of seven Bitcoin futures ETFs have been approved, with more than 20 still waiting for the regulator’s permission. The SEC says that the cryptocurrency industry is new and subject to manipulation, which is why it has been delaying crypto-related futures ETFs for the last few years.

Is Bitcoin spot ETF approved?

Bitcoin spot ETF has been approved outside the US, but the SEC is yet to approve one in the country. After BlackRock filed for a Bitcoin spot ETF on June 15, the interest surrounding crypto ETFs has been renewed. Grayscale – whose application for a Bitcoin spot ETF was initially rejected by the SEC – got a victory in court, forcing the US regulator to review its proposal again. The SEC’s loss in this lawsuit has fueled hopes that a Bitcoin spot ETF might be approved by the end of the year.

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