Asset owners and asset managers are ready to jump into bitcoin exchange-traded funds (ETFs) as soon as regulators give their approval and as long as these instruments meet regulatory standards.
This is evident from the fact that more ETFs and exchange-traded notes (ETNs) are seeking approval from regulators as issuers and their service providers prepare to launch such products in the market.
State Street, for example, has been awarded at least three mandates for bitcoin ETFs and ETNs, which Mostapha Tahiri, the firm’s chief executive officer for Asia-Pacific, says is a sign that there is growing interest among institutional investors in cryptocurrency and other digital assets.
“We are already seeing more and more demand from our clients to service their digital strategies. In February to April of 2021 alone, we have seen a 300% growth in clients’ investments in cryptocurrency,” Tahiri tells The Asset in an interview.
In April of this year, State Street announced that it was appointed as the administrator of a planned bitcoin-backed ETN initiated by Iconic Funds BTC ETN GmbH, a subsidiary of Iconic Funds GmbH. The ETN will be listed on the Frankfurt Stock Exchange, following approval from the German securities regulator BaFin.
In March State Street announced that it was appointed as the fund administrator and transfer agent of the Van Eck Bitcoin Trust, a new bitcoin ETF that is ending approval by the US Securities and Exchange Commission (SEC).
Tahiri says: “It’s still modest at the scale of the asset allocation but there is a big interest in bitcoin ETFs. The connection between digital assets and ETFs is becoming a key trend. The regulators are still cautious, that’s what is maybe preventing the acceleration we wish to see. They want to make sure everything is well-managed so it’s kind of a testing environment. It’s opening progressively but definitely coming. There’s a lot of interest from asset owners which are our clients, definitely from asset managers, and mainly in passive instruments.”
Meantime, the US SEC has delayed the approval of a number of digital ETFs, including Wisdom Tree Bitcoin ETF, Van Eck Bitcoin ETF, and Valkyrie Bitcoin ETF. The delays are seen as a signal that the regulator remains cautious on the risk management and controls that would accompany these new instruments.
“We have RFPs (requests for proposal) as we speak today around ETF bitcoin. Our clients are ready to grow, we are ready to grow, we just need to make sure the regulations are in place,” Tahiri says.
Invesco also has plans to launch two cryptocurrency-focused ETFs, the Invesco Galaxy Blockchain Economy ETF and the Invesco Galaxy Crypto Economy ETF, both of which are also awaiting approval from the US SEC.