Although the Securities and Exchange Commission this month
Some financial firms have changed their minds about bitcoin and crypto in recent years. Larry Fink, CEO of Blackrock, called bitcoin an "
Contrasting bitcoin ETFs with ETFs for precious metals including gold, Gensler said in a statement on the approvals that the underlying assets in the metals' ETFs have "consumer and industrial uses" while bitcoin is "primarily a speculative, volatile asset" that's used for, among other illegal activities, money laundering.
Although banks might not have the same level of antipathy for bitcoin as Gensler, their attitudes toward bitcoin are not likely to change simply because of the SEC's ETF approvals, according to Joseph Silvia, former counsel at the Federal Reserve Bank of Chicago and a financial institutions attorney at Dickinson Wright.
For "the vast majority of banks," he does not imagine any involvement in bitcoin ETFs — let alone actual investment — and those who do touch it are likely to only be indirect players.
"More broadly, banks have only really touched crypto through the custody business," Silvia said. "I don't see that changing because of these recent developments."
Silvia said that since March 2023, banks have largely been hoarding whatever cash they do have instead of
"I may be too skeptical here, but this is not the economic or banking environment where any extra cash banks have would be put toward these vehicles," Silvia said.
Not only do banks have little interest in getting
"Couple that with the funding and liquidity challenges banks are grappling with in the wake of the March 2023 failures and slower economy, and I really don't see much interest," Silvia said.
Robinhood and a few other trading app providers immediately announced support for the newly approved spot bitcoin ETFs. But Vanguard announced this week it would not allow customers to invest in them.
Some bitcoin backers agree, in part. While new bitcoin ETFs are likely to pop up now that the first 11 are approved, potential sponsors of new crypto ETFs face a great deal of risk, according to Steven Lubka, head of private clients at Swan Bitcoin, which offers bitcoin investment services including tax-advantaged accounts based on bitcoin.
"While you may see some positioning for an ether ETF because ether has a futures market, no other cryptocurrencies have a futures market," Lubka said.
Instead, Lubka expects spot bitcoin ETF approvals to spawn a market of bitcoin-related investment products. Anything from leveraged spot ETFs, covered call ETFs or endless variations that combine bitcoin with gold, tech stocks and more.
Others are more optimistic. Given the court's rebuke of the SEC, the risk calculations on sponsoring additional crypto-tied ETFs have changed, according to CK Zheng, co-founder and chief information officer at ZX Squared Capital, a hedge fund with a sole focus on digital assets.
Certainly this is true of bitcoin itself, but Zheng argued it also applies to ether and other crypto assets. "For many traditional financial institutions, the risk of missing out on the new crypto asset class to their banking clients is probably far larger than their regulatory concerns," Zheng said.
