Recent approval of Spot Ether ETFs marks another pivotal moment for the digital asset industry. Registered Investment Advisors (RIAs) are presented with a new opportunity to further integrate digital assets into their clients’ portfolios.
Q: What is a Spot Ether ETF and why is it important?
A: A Spot Ether (ETH) ETF is an exchange-traded fund that directly holds ETH, the world’s second largest digital asset by market cap behind Bitcoin (BTC). These ETFs provide investors with the ability to gain exposure to ETH through a familar, low-cost vehicle that can be utilized in a variety of investment accounts, including tax-advantaged retirement accounts. ETH ETFs can help RIAs potentially diversify client portfolios and meet growing demand for digital asset exposure.
Similar to the BTC ETFs approved earlier this year, the approval of ETH ETFs signifies a major step towards mainstream adoption of digital assets and bolsters investor confidence in the digital asset space. Issuers include many of the traditional institutions and crypto-native companies that brought Spot BTC ETFs to the market such as BlackRock, Fidelity, Grayscale, and others.
Q: How are ETH ETFs different from Ether or existing related offerings?
A: A key difference between the ETH ETFs and direct ETH ownership is the absence of the potential to earn staking rewards. Staking is a process where investors lock their tokens up for a period of time to secure the network in exchange for rewards. It is a crucial part of the Ethereum blockchain’s proof-of-stake consensus mechanism. While certain ETF issues sought regulatory approval to add staking to their ETFs these proposals were ultimately denied by the SEC.
ETH ETFs may also offer different fee structures and tax implications when compared to direct ownership of ETH.
Q: What should RIAs do now?
A: The approval of ETH ETFs present another opportunity for RIAs to educate their clients and potentially expand their investment offerings. It is essential to consider the following:
Educate yourself, your team, and your clients: learn more about ETH and how it fits into your investment strategy. It is also critical to stay informed about SEC regulations and potential changes that could impact digital asset investing as a whole. Understand who different ETF issuers are to ensure fees, track record, and objectives align with your practice and your clients’ needs.
Consider the impacts of direct vs. indirect ownership of digital assets: evaluate the potential benefits and drawbacks to either method of investing. While regulated and potentially cost effective, ETH ETFs do not provide direct ownership to ETH. There may be potential benefits to holding the direct asset without the perceived complexities. It is also important to consider the tax implications of each for your clients.
Engage with 3rd party asset allocation managers or sub-advisers: avoid unintended exposure for clients and learn more about their approach to adding ETH ETFs to model portfolios.
Q: What if my clients would benefit from direct ownership of digital assets?
A: BitGo’s Platform for Wealth Management offers RIAs a solution for managing their clients’ direct digital asset holdings. This includes features such as bulk trade execution, portfolio rebalancing and comprehensive dashboards that can help simplify the complexities of managing digital asset portfolios. Another distinct advantage of our Platform of Wealth Management is that custody is provided by BitGo Trust Company, Inc., the industry’s leading regulated qualified custodian with $250MM of insurance coverage. To learn more about our solution for RIAs, contact us today.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com.
©2024 BitGo Inc. (collectively with its affiliates and subsidiaries, “BitGo”). All rights reserved. BitGo Trust Company, Inc., BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless. The information provided herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. BitGo is not directing this information to any person in any jurisdiction where the publication or availability of the information is prohibited, by reason of that person’s citizenship, residence or otherwise.
