CRYPTO — What Do RIAs Need To Know About Bitcoin ETFs And Separately Managed Crypto Accounts?

The individual investor should act consistently as an investor and not as a speculator. — Ben Graham

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In a world where digital assets reign supreme and the cryptocurrency market continues to captivate investors, the recent approval by the SEC of spot Bitcoin ETFs has undoubtedly made a historic impact. The approval has paved the way for a new avenue of safe and compliant access to the largest cryptocurrency, Bitcoin. Since the approval, there has been a significant influx of over $10 billion in inflows, fostering a positive outlook for Bitcoin and the broader market. For retail investors, spot Bitcoin ETFs offer simplified access to Bitcoin, backed by secure custody, and eliminate the complexity of managing private keys themselves.

With the growing interest in crypto, Bitcoin ETFs raise new questions for institutions managing client assets. How should they meet client demand for digital asset exposure? What investment vehicles are best suited for the task? Alongside spot Bitcoin ETFs, the crypto separately managed accounts (SMAs) have emerged as a complementary investment vehicle that’s gaining traction among wealth managers, family offices, and registered investment advisors (RIAs).

Crypto SMAs allow investors to gain exposure to a wide range of assets beyond Bitcoin, providing the flexibility to tailor portfolios to different client types and strategies. They offer an avenue for sophisticated tax management strategies and enable diversification, risk adjustment, and professional management based on market analysis and individual goals. These advantages make SMAs an attractive choice for institutions aiming to engage with the digital asset class while adhering to regulatory and security requirements.

Moreover, the regulatory and security profile provided by crypto SMAs is reinforced by the involvement of qualified custodians, who play an essential role in safeguarding assets and adhering to regulatory standards. The recent SEC proposal has emphasized the significance of qualified custodians across asset classes, including crypto, highlighting the importance of their role in the management of digital assets.

In light of these developments, wealth managers, family offices, and RIAs should carefully consider both spot Bitcoin ETFs and crypto SMAs as secure and compliant investment vehicles. By focusing on key areas such as asset support, portfolio allocation, and tax status, institutions can make informed decisions when selecting investment options, whether it’s a spot ETF, a crypto SMA, or a combination of the two. Ultimately, having more choices for participation in the digital asset class is a significant benefit for consumers and institutions, strengthening the ecosystem as a whole.

In conclusion, the rise of spot Bitcoin ETFs and the growing popularity of crypto SMAs have injected a new wave of opportunities for institutional investors and the broader market, offering safe, secure, and compliant avenues for engaging with the digital asset class.

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