News
Why Advisors Remain Hesitant to Talk Crypto Despite Bitcoin ETF Success
Key points
- The approval of spot bitcoin ETFs in the United States has been a clear catalyst for the cryptocurrency’s price surge this year.
- Market observers say financial advisors are still wary of talking about cryptocurrencies with clients.
- Regulatory uncertainty continues to be a clear concern for financial advisors, although the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21) could improve the situation.
- Analysts say that many financial institutions have not yet authorized the offering of Bitcoin-based ETFs to their clients, a situation that could change in the coming months.
Spot bitcoin exchange-traded funds (ETFs) have amassed more than $14.6 billion in inflows, virtually pushing a bitcoin (BTC) rally in prices since they were first launched in January. But the vast majority of financial advisors still don’t want to discuss cryptocurrencies with their clients.
A study by Cerulli Associates found that, although growing in numbers, only 2.6% of consultants have recommended cryptocurrency opportunities to their clients. In fact, only 12.1% of advisors are willing to discuss cryptocurrency if their clients talk about it.
Since advisors are not helpful, investors must decide for themselves how to invest in cryptocurrencies.
According to Samara Cohen, BlackRock’s chief investment officer of ETFs and index investments, about 80% of inflows into these products come from self-employed investors using online brokers.
What needs to change for financial advisors to adopt cryptocurrencies?
Regulatory uncertainty continues to be a key concern for advisors’ engagement in the cryptocurrency industry.
“Despite the recent change of heart by the SEC which had not been foreseen until shortly before ETH [spot ether ETF] approval deadline, a significant regulatory framework on this matter digital goods “it is still missing”, we read in the Cerulli report.
Some regulatory ambiguities could be resolved by the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21), which has already passed the House of Representatives but still needs approval from the Senate and President Biden.
However, this alone may not be enough.
“Many of the largest wealth management platforms, barbed wire housesand advisor networks have not yet fully approved Bitcoin ETFs,” Bloomberg Intelligence analyst James Seyffart said in an interview. “In most cases, the only way those advisors or brokers are currently allowed to purchase a Bitcoin ETF for their clients is after a client specifically requests it.”
Seyffart said he expects the advisor rules to offer spot bitcoin ETF its customers to make changes by the end of the year, although this process could still take several months to complete.
That said, it’s not as if advisors aren’t warming up to cryptocurrencies at all. Cerulli also found that 58.9% of financial advisors never expect to discuss Encrypt with their customers; however, this percentage is slightly down from the 62.2% who responded the same way last year.