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Spot Bitcoin ETFs and Crypto SMAs: Complementary Investment Vehicles for Institutions
According to CoinDesk, the recent approval of spot Bitcoin ETFs by the SEC has been historic, providing a new avenue for safe and compliant access to the largest cryptocurrency. Since January 10, over $10 billion in inflows have been recorded, driving a favorable outlook for Bitcoin and the broader market. Spot Bitcoin ETFs simplify access to Bitcoin for retail investors, backed by secure custody and removing the complexity of managing private keys. As interest in crypto rises, Bitcoin ETFs raise new questions for institutions managing client assets, such as how to meet client demand for digital asset exposure and which investment vehicles are best. Crypto separately managed accounts (SMAs) are quickly gaining ground with wealth managers, family offices, and registered investment advisors (RIAs) as a complementary investment vehicle.
Crypto SMAs allow for direct ownership of a wide range of assets beyond Bitcoin, enabling institutions to meet client demand for greater depth of exposure to crypto, especially novel protocols or tokenized real-world assets. They are easy to tailor to different client types and strategies, providing institutions with the regulatory and security profile needed to engage in the asset class. A qualified custodian should serve as the base layer of a compliant crypto SMA to safeguard assets. The SEC has recently emphasized the importance of qualified custodians across asset classes, including crypto. An SMA approach enables investors to customize their portfolio to include many digital assets, allowing for diversification, risk adjustment, and sophisticated tax management strategies, such as tax-loss harvesting on an individual basis. Institutions should consider both spot Bitcoin ETFs and crypto SMAs side-by-side as safe, secure, and compliant investment vehicles, focusing on key areas like asset support, portfolio allocation, and tax status to make the best decision when selecting a spot ETF, a crypto SMA, or a combination of the two. The availability of more choices for participation in the digital asset class is a major net positive for consumers and institutions, resulting in a stronger ecosystem.
Crypto SMAs allow for direct ownership of a wide range of assets beyond Bitcoin, enabling institutions to meet client demand for greater depth of exposure to crypto, especially novel protocols or tokenized real-world assets. They are easy to tailor to different client types and strategies, providing institutions with the regulatory and security profile needed to engage in the asset class. A qualified custodian should serve as the base layer of a compliant crypto SMA to safeguard assets. The SEC has recently emphasized the importance of qualified custodians across asset classes, including crypto. An SMA approach enables investors to customize their portfolio to include many digital assets, allowing for diversification, risk adjustment, and sophisticated tax management strategies, such as tax-loss harvesting on an individual basis. Institutions should consider both spot Bitcoin ETFs and crypto SMAs side-by-side as safe, secure, and compliant investment vehicles, focusing on key areas like asset support, portfolio allocation, and tax status to make the best decision when selecting a spot ETF, a crypto SMA, or a combination of the two. The availability of more choices for participation in the digital asset class is a major net positive for consumers and institutions, resulting in a stronger ecosystem.
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