Advisors cautious with Bitcoin ETF adoption: BlackRock exec

Samara Cohen, BlackRock’s chief investment officer of ETF and index investing, hinted that financial advisors remain “cautious” about adopting spot Bitcoin (BTC) exchange-traded funds (ETFs) despite the investment vehicle’s success.

Although Bitcoin ETFs have attracted over $50 billion in investments since their launch in January 2024, they still face slow uptake among financial advisors.

According to Cohen, approximately 80% of Bitcoin ETF purchases come from self-directed investors who make their own allocations through an online brokerage account.

Cohen emphasized that financial advisors are cautious about joining the spot Bitcoin ETF bandwagon due to their fiduciary responsibilities to clients.

Given Bitcoin’s history of significant price fluctuations, advisors meticulously analyze Bitcoin’s role in portfolios and determine appropriate allocations based on the investor’s risk tolerance and liquidity needs.

He emphasized that this data and risk analytics evaluation process is vital for advisors to effectively perform their duties amidst ongoing uncertainties in the market.

The flagship cryptocurrency has experienced significant fluctuations over time, posing a significant risk to potential investors. He also notes that the relatively short history of Bitcoin ETFs contributes to skepticism from financial advisors, as limited track record raises doubts about their reliability and long-term performance.

Another important deterrent is the regulatory environment. The financial industry continues to grapple with establishing a clear regulatory framework for cryptocurrencies, creating uncertainty and wariness among financial advisors. The lack of definitive rules and the possibility of regulatory adjustments make recommending Bitcoin ETFs to clients even more complicated.

Despite these challenges, Bitcoin ETFs show promise as a conduit between cryptocurrency and traditional finance. They offer a regulated and more accessible way for investors to participate in the cryptocurrency market.

However, the slow pace of adoption among financial advisors underscores the need to increase education and awareness to overcome existing barriers.

Regulatory changes

The US Securities and Exchange Commission’s (SEC) approval of Bitcoin ETFs has had a profound impact on the cryptocurrency market, especially with issuers like ARK and 21Shares.

Major issuers who have secured Bitcoin ETF approvals are now seeking the same for Ethereum (ETH). This development has attracted the attention of investors trying to gain access to the second largest cryptocurrency by market value.

But the SEC remained cautious amid the excitement. SEC Chairman Gary Gensler emphasized that most crypto assets are considered investment contracts and therefore fall within the scope of federal securities laws.

This stance is a departure 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 compared to Bitcoin.

Still, Gensler expects to fully approve spot Ether ETFs by the end of summer 2024.

The SEC had previously granted initial approval to a group of ETFs, and final registration requirements, known as S-1 filings, are currently being processed at the staff level. Once these applications are approved, new ETFs can be listed that provide easy-to-trade funds holding real Ether to the market, similar to previously created Bitcoin spot ETFs.

At the budget hearing before the Senate Appropriations Committee, Gensler highlighted the smooth progress of the registration process for these ETFs. He noted that individual issuers are proceeding diligently and efficiently through the registration stages.