Bitcoin ETF Approval Stokes Reinvigorated Institutional Excitement for Cryptocurrency

Today, in a landmark moment for the digital assets ecosystem, the Securities and Exchange Commission approved the first ever Bitcoin ETF (exchange-traded fund). This highly anticipated decision opens a door for traditional finance (TradFi) institutions to pursue additional revenue streams by offering SEC-approved crypto investments to clients. Many industry watchers and financial analysts expected the approval to come through, in part due to the potential for it to drive billions of dollars into the market.

With this new development in the digital assets market, there are numerous benefits financial institutions can pursue. These include: 

• New avenues of business. The ability to offer crypto investments to clients provides institutions with a new category of financial products and services to generate revenue through a regulatory-approved asset class. 
• Risk reduction. SEC approval adds much-needed regulatory parameters to these markets, which help to reduce risk for financial institutions operating in cryptocurrency and other digital assets. This is likely to be the first of many steps to implement regulatory frameworks around digital assts similar to those of the TradFi.  
• Increased adoption. With more engagement for Bitcoin from large institutions, other digital assets are likely to see a lift and to follow the guidance of Bitcoin ETF regulations as a path forward. 
• Investor protections. With a Bitcoin ETF, investors can rely on their trusted financial advisors and existing financial networks to gain access to the liquidity of Bitcoin without having to own the individual coin itself.
• Regulatory clarity. The broader digital asset ecosystem stands to benefit and mature with the emergence of clearer regulatory guidance imposed by federal authorities. 

As financial institutions begin to engage in this new market, they will also need to ensure they have implemented robust compliance controls that attend to the nuances unique to digital assets. Ensuring adherence to the regulatory guidance for Bitcoin ETFs and fully complying with the rules will be crucial to enabling successful investments. Specifically, addressing the requirements as they apply to the technological nature of digital assets can be a differentiator from programs only relying on TradFi workflows and rules. Given the fierce competition that is expected to ensue around Bitcoin ETFs, this kind of program differentiation will help financial institutions gain a foothold in this emerging category.

Trusted advisors who understand the underlying technology can provide a detailed view of the potential risks. With this guidance, financial institutions can take the right steps to mitigate the risks and establish programs that will support continued success and growth.  

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The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.