BlackRock’s recent move of registering a Bitcoin Exchange-traded Fund (ETF) with the U.S. Securities and Exchange Commission has reignited interest and controversy around the inclusion of the considerably volatile cryptocurrency in the traditional financial marketplace. BlackRock’s intriguing move made a noticeable echo in the industry, however, to comprehend the potential outcomes we can divert our attention to our northern neighbor – Canada. Over the past two and a half years, Canada has successfully integrated and operated spot Bitcoin ETFs without any drastic setbacks.
Crypto enthusiasts, particularly of the “not-your-keys, not-your-crypto” persuasion, might argue the downside of acquiring Bitcoin exposure via an ETF. The main concern lies in that the investors don’t have direct ownership of the underlying asset. Nevertheless, taking a broader stance, it is clear that ETFs provide benefits extending beyond the realms of the staunch crypto buffs.
The major complaints regarding direct control of coins is partially set aside when we learn from the Canadian happenings. Strict regulations in Canada have paved the way for fund providers to function transparently and follow stringent operational procedures that make asset commingling, fraudulent activities, and cyber threats highly unlikely. Interestingly, Canadian investors who’ve invested in local spot Bitcoin ETFs haven’t faced losses due to hacking or mismanagement which hasn’t been the case with millions who trusted their assets with entities such as FTX, Celsius Network and BlockFi which are all notorious in the crypto-world for mishandling.
The SEC has repeatedly put forth that a Bitcoin ETF might be a risky affair for investors yet, they are concurrently approving Bitcoin futures ETF’s and direct transactions of digital assets on various exchanges. Although, Canadian authorities’ experiences with these financial instruments have shown the effectiveness of ETFs in emulating direct Bitcoin exposure, bypassing the usual risks of futures markets or oversight of unregulated exchanges.
Undeniably, accessibility is a key factor when considering the potential of any asset to breach mainstream adoption. The Bank of Canada’s 2021 study revealed that the surge in Bitcoin investments is associated with user-friendly mobile exchanges. Hundreds of millions of dollars that have swept into the three leading Canadian Bitcoin ETFs indicate that investors do appreciate a Bitcoin-backed financial product, fully assimilated within conventional finance system. The narrative of Bitcoin ETF might still be in honeymoon phase, concluding so soon could be premature, and only long term results can reveal the real credibility of Bitcoin ETF’s.