U.S. financial regulators have approved 11 new bitcoin exchange-traded funds, making them available for trade for the first time in U.S. markets. Andres Rincon, Head of ETF Sales and Strategy at TD Securities, discusses the implications with MoneyTalk’s Greg Bonnell.
* The US Securities and Exchange Commission has approved the availability of 11 spot Bitcoin ETFs for trading on the US markets. Joining us now to discuss is Andres Rincon, head of ETF Sales and Strategy at TD Securities. Andres, it's great to have you with us, as always. Interesting developments here. Walk us through these developments and the products that are coming to market.
* For sure. And after many, many years of work between issuers and regulators, the SEC has finally approved the first spot Bitcoin ETF in the US. Now, there was already an approval for several futures-based Bitcoin ETFs in the US. But this is the first ones for spot Bitcoin ETF.
* And with that, as you mentioned, they've approved 11 spot Bitcoin ETFs in the US with a variety of management fees, and different indices, and whatnot. So although it's still spot Bitcoin ETF, there is a lot of diversity in there in how to get exposure to spot Bitcoin ETF. Whether the regulators like that or not, what that has actually done is it has provided a little bit more legitimacy to the crypto space, and also, really, a lot of encouragement to investors to invest in this very big and growing market through the regulated market of ETFs.
* And also what it does is it gives access to a lot of people and investors that probably didn't have access to spot Bitcoin ETFs or spot Bitcoin before. For example, if you were an advisor, you probably did not have access to a wallet for your clients as a cold or a hot wallet. Now you do through spot Bitcoin ETFs.
* So these are very interesting developments. We were just showing the audience the list of the 11 that the SEC has said can begin trading. How do they actually work? If someone's wondering, OK, I understand that the SEC has done something here, what is the product?
* So these spot Bitcoin ETFs that have been launched, all they do is, really, they hold crypto. They hold, in this case, specifically Bitcoin that they hold. So you, the investor, gives money to the ETF to buy units of the ETF.
* The ETF then goes and buys crypto on behalf of the unit holders. And they store it in a cold wallet on behalf of that unit holder, in the same way that you would do if you had a wallet on a crypto exchange. But they do that for you.
* So what we've seen now is the launch of many, many different ETFs. As you mentioned, 11. And the management fee varies quite a bit between these ETFs.
* So you have as low as 20 bips, or a fifth of a percent, to as high as 1 and 1/2%. So it varies quite a bit. And what's really interesting is that we have already seen a fee war--
* I was going to ask you about that because you and I talk about ETFs all the time. We talk about fee wars. So this is already happening in this very, very new space.
* It hasn't-- well, before I forget, these ETFs start trading today. And we've already seen a fee war in these ETFs. Seven of these ETFs have already waived their fee for half a year. So zero management fee to start the year, many of these ETFs. And we're going to very likely see a lot of trading in these ETFs.
* Could be a very interesting space. Of course, we are talking about what the SEC has allowed in the United States. Of course, Canada has had a market, I believe, in products like this for a bit of a time now.
* Yes. So as I mentioned earlier, we've had futures-based ETFs for some time now. And the market is sizable in the US. Call it 12 products.
* But Canada has had both a futures-based Bitcoin ETF and a spot Bitcoin ETF. We're actually the leaders in the world to be the first to launch a Bitcoin ETF in the world. Purpose did so, and Evolve, and many other issuers did so here in Canada.
* So we have a fairly large market. We have about 28 crypto ETFs already in Canada, and we cover about 4 and 1/2 billion dollars. What's going to be really interesting is that one of the ETFs that launched today, the Grayscale one, is really a conversion from a different fund structure. So the crypto industry in the US on the ETF side will already have $30 billion just as of today.
* All right. So these are very interesting developments. Obviously, with any asset class, you talk about legitimacy, right? I feel like this has been the cryptocurrency story for several years, whether Wall Street and Bay Street will start to adopt, and clearly that they have. But what are the risks here in an asset class like Bitcoin, a cryptocurrency?
* As many of your guests would understand, many of your viewers, there are a lot of risks with crypto. There's obviously volatility risks. This is a very volatile asset. So obviously, there's also principal risk, that you could lose a big portion of your investments.
* But I'm going to paraphrase the very person that approved these ETFs, Chair Gensler from the SEC. When he approved them, he said that, although they approved all these ETFs, this is not really an encouragement to investors to invest in crypto. And they obviously are citing or saying a lot of the risks that are out there.
* And they're saying, although we approved them, this is not necessarily an approval of Bitcoin in itself or the appropriateness of it. So it's important to understand a lot of the risks still for investors when you're investing in these. And from our perspective on the ETF side, something to bear in mind is that, in the same way that when you invest in crypto through a crypto exchange and then you store in a cold wallet, these assets are also stored in a cold wallet.
* And we've known that, historically, some of these cold wallets could be at risk from theft and whatnot. So it's important to understand those risks as an investor. And so it's important to do your due diligence. Now, a lot of these crypto ETFs have very professional, large custodians, so the risk is very low in those circumstances. But it's a risk that it's important to mention.