Banks’ Stance on Bitcoin ETFs: From Restriction to Broad Access

Banks Citi and UBS are set to add spot bitcoin ETFs to the list of trading instruments available to their clients, in contrast to the stance of several other major institutions. This was reported by CoinDesk.

A source from UBS informed the publication that the product will be unavailable to account holders with lower risk tolerance.

At Citi, institutional clients can trade the exchange-traded fund, while a decision regarding individual wealthy clients is yet to be made.

On January 11, major asset manager Vanguard announced it would not allow clients to trade spot bitcoin ETFs. According to its official account on X, “the high volatility [of the instrument] is detrimental to generating long-term returns.”

Vanguard won’t offer spot bitcoin ETFs, says high volatility is bad for generating long-term returns https://t.co/NvvtpBduQ3

— The Block (@TheBlock__) January 11, 2024

On the same day, unconfirmed rumors emerged that UBS and Citi might follow suit.

According to Fox Business, Merrill Lynch has not opened access to spot bitcoin ETFs for its clients. The organization’s policy does not permit such products, but the company will make a final decision after assessing the nature of trading with these instruments.

?SCOOP: @MerrillLynch also currently not allowing their customers access to the $BTC Spot ETFs. According to a source who received guidance from the company earlier this week, Merrill is waiting to see whether the ETFs trade efficiently before making any decisions to change… https://t.co/Fu810vdWn1

— Eleanor Terrett (@EleanorTerrett) January 11, 2024

Fox Business found that, besides Merrill Lynch, Edward Jones, UBS, and Northwestern Mutual have shown similar conservatism.

This stance has sparked negative reactions among bitcoin-enthusiastic clients, some of whom have expressed a desire to change brokers.

And this is not the first person I’ve seen say they plan to leave @Vanguard_Group in favor of @Fidelity or an outfit that offers exposure to the $BTC ETFs.

Will Vanguard change its mind? https://t.co/g9mLFMaHYb

— Eleanor Terrett (@EleanorTerrett) January 11, 2024

Vanguard’s competitors—BlackRock, Fidelity, and Invesco—have themselves issued the product. Major broker Charles Schwab confirmed to CoinDesk that it will not restrict clients.

According to Bloomberg analyst Eric Balchunas, over 700,000 trades were conducted with 11 spot bitcoin ETFs on the first trading day. This figure is double that of the popular QQQ contract [ETF on the Nasdaq tech index]. The expert admitted he expected far less interest in the product.

All told there were 700,000 individual trades today in and out of the 11 spot ETFs. For context, that is double the number of trades for $QQQ (altho it sees much bigger $ volume bc bigger fish use it) So a lot more grassroots action (vs big seed buys) than I expected which is… pic.twitter.com/syUGfjHQpr

— Eric Balchunas (@EricBalchunas) January 11, 2024

The total volume exceeded $4.6 billion, half of which was attributed to Grayscale’s GBTC.

Here’s the #Bitcoin ETF Cointucky Derby data via trading volume on day 1 (more volume will continue for a little while).

Total Volume was over $4.6 Billion with $GBTC about half of it. BlackRock & Fidelity went 1 & 2 absent GBTC. pic.twitter.com/t70MzyQfZW

— James Seyffart (@JSeyff) January 11, 2024

U.S. Senate Banking Committee member Elizabeth Warren criticized the SEC for approving the product.

The @SECgov is wrong on the law and wrong on the policy with respect to the Bitcoin ETF decision.

If the SEC is going to let crypto burrow even deeper into our financial system, then it’s more urgent than ever that crypto follow basic anti-money laundering rules.

— Elizabeth Warren (@SenWarren) January 11, 2024

“If the SEC is going to let cryptocurrencies penetrate even deeper into the financial system, it is more important than ever that they follow basic anti-money laundering rules,” she stated.

Warren has been advocating for her Digital Asset Anti-Money Laundering Act, which proposes extending KYC requirements to miners, validators, wallet providers, and others.

Warren’s stance on spot bitcoin ETFs was not shared by some of her Congressional colleagues.

I am thrilled @SECGov granted approval for all 11 #Bitcoin spot exchange traded funds.

Read my full statement ⬇️ pic.twitter.com/VkSbtVE2Do

— Senator Cynthia Lummis (@SenLummis) January 10, 2024

“[The registration of the exchange-traded fund] will provide millions of Americans easier access to crypto assets and allow them to benefit from professional managers at more competitive fees,” explained Wyoming representative Cynthia Lummis.

House Financial Services Committee Chairman Patrick McHenry supported her.

Today’s spot Bitcoin ETF approvals mark a historic milestone for the future of the digital asset ecosystem.

While action to provide clarity and certainty for digital assets remains necessary, the steps taken today are a significant improvement over regulation by enforcement. https://t.co/RC0OLHB1zQ

— Patrick McHenry (@PatrickMcHenry) January 10, 2024

“While legislation to provide clarity and certainty regarding digital assets remains necessary, the steps taken today are a significant improvement over the SEC’s experience with regulation by enforcement,” he explained.

On January 12, it was reported that South Korean brokers, including the country’s largest, Samsung Securities and Mirae Asset, suspended client access to overseas spot bitcoin ETFs following a warning from the local regulator.

“Brokerage activities […] regarding instruments listed on foreign exchanges may violate the government’s existing positions on virtual assets and capital market laws,” the directive stated.

On January 11, ForkLog reported, citing local media, that the FSC confirmed its commitment to a rule that restricts the launch of bitcoin ETFs. Experts interviewed by The Block noted that following the U.S., the product could be approved in Hong Kong and Singapore.

In the pre-trading session on January 11, before its Nasdaq debut, the price of BlackRock’s spot bitcoin ETF (IBIT) exceeded its NAV by 25.6%.

The launch of these instruments triggered a surge in bitcoin to $49,000.