Edition 3
Top Institutional Stories
The recently launched spot Bitcoin exchange-traded fund (ETF) has achieved a cumulative trading volume of over $170 billion USD less than 10 weeks after the US SEC approved ETFs from BlackRock, Fidelity, and Bitwise, among others. In early-March, analysts noted that BTC was on pace to pass gold ETFs in terms of value in a few months. For comparison, physically backed gold ETFs have about $91 billion in assets, according to VettaFi data.?
Why it Matters:?
With institutional investors pouring billions of dollars into the ETFs, it’s creating competitive vying for fund superiority, with a deluge of outflows from GBTC and inflows into the rival IBIT evening the AUM in the two ETFs within sight of each other. Factors like fees, with GBTC’s fee remaining higher than the competition, will continue to impact the appetite for inflows, along with dictating outflows between the major ETFs. Examining the two giants, outflows from GBTC since launch have totaled $13.6 billion, while inflows for IBIT have been $13.3 billion. Total flows into nine new spot Bitcoin ETFs over the past two months exceeds total flows into all physical gold ETFs over the past 5 years, according to an analyst.?
Nayib Bukele, the president of El Salvador, said that the nation now owns 5,700 bitcoins, posting a screenshot of the holdings on X. President Nayib Bukele led the effort to pass a law making Bitcoin legal tender in 2021, promoting financial inclusion, job creation and facilitating fee-free remittances using the Chivo wallet system. At BTC’s current price range hovering around $70k, El Salvador's bitcoin stack exceeds $400 million in value.
Why it Matters:?
El Salvador continues to set the standard for creating a bitcoin-friendly country. In addition to being the first country to make bitcoin (BTC) legal tender, President Bukele eliminated income tax on money coming into the country from abroad, lowering the rate from 30% to 0 in an effort to stoke foreign investment. In late-2023, El Salvador also introduced a law granting citizenship to bitcoin investors who make a donation to the government. This demonstrates a bitcoin based approach to other rapidly developing nations exploring alternative strategies for growth, with President Bukele emphasizing the allure to "altruistic foreigners interested in supporting the economic, social and cultural development of El Salvador.”
The U.S. Securities and Exchange Commission (SEC) has once again postponed its decision on whether to approve Grayscale's Ethereum futures trust exchange-traded fund (ETF). The delay comes as the SEC continues to evaluate the potential risks and regulatory concerns surrounding the ETF, which seeks to track the performance of Ethereum futures contracts. Despite the hang-up with Grayscale’s submission, Fidelity pushed forward and filed its S-1 for its Ethereum ETF on March 27th, 2024. Of note is the proposal that the ETF would trade on the Cboe BZX Exchange, and Fidelity Digital Asset Services would serve as custodian of the trust’s ETH.
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Why it Matters:
The SEC said it would take until May 30, 2024, to decide whether to approve Grayscale’s Ethereum futures ETF, reflecting the asset’s undefined regulatory status as a security versus a commodity. Grayscale Investments, the world's largest digital currency asset manager, initially filed for the ETF in September 2021. Adding to the lack of current regulatory clarity is the SEC’s decision to approve ETH futures ETF in October 2023, which implicitly classified Ethereum as a non-security commodity. If ETH is labeled a security, it could face stricter trading regulations, posing challenges for investors and exchanges.??
BlackRock, the world's largest asset manager, has made a significant move into the asset tokenization space by launching a new fund on the Ethereum network. BlackRock wants to offer its clients assets tokenized on Ethereum’s blockchain and allow them to earn yield through holding tokens on the network. BlackRock’s money-market fund that records share ownership on the Ethereum blockchain has attracted more than $240 million since its debut a week ago, according to Bloomberg. BlackRock’s US dollar Institutional Digital Liquidity fund, dubbed BUILD, will invest in US Treasury bills, cash, and repurchase agreements and offers a stable value of $1 per token, per BlackRock.
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Why it Matters:?
The launch of BlackRock’s fund is significant because it bridges partnerships between the TradeFi world, including BNY Mellon, and the crypto world, including Coinbase and Fire Blocks, with Securitize acting as a transfer agent and tokenization platform. BlackRock’s fund will “act as the first major test-case for institutional holders to experience 24/7 instant settlement benefits of the blockchain with increased transparency and improved capital efficiency, at reduced operating costs,” according to an analyst at a major private wealth management firm. This decision highlights BlackRock's backing of tokenization as a solution to offer investors greater accessibility and efficiency in asset management, and increase liquidity in traditional markets.
The London Stock Exchange (LSE) has announced May 28 as the start date for the trading of crypto exchange-traded notes (ETNs). These ETNs will be offered by Switzerland-based investment product provider 21Shares AG and will be denominated in both US dollars and euros. LSE said the trading is slated to start as soon as the second quarter of the year (May 28), with the UK Financial Conduct Authority (FCA) clarifying that “Crypto ETNs admitted to trading on LSE are only appropriate for professionals (non-retail) and are only available under trading segments specifically designated as 'Professional investors only.”??
Why it Matters:
ETNs are essentially debt securities that track an underlying asset. Thus, Crypto ETNs will enable investors to trade securities that mirror the performance of crypto assets on the exchange. The decision by the London Stock Exchange to facilitate the trading of crypto ETNs follows the US SEC’s approval of 11 ETF offerings for trading in January of this year. With this major approval, regulators in other countries including Hong Kong and now the United Kingdom are now open to a variation of the product, and the door is now open for other major stock exchanges around the world to follow suit.
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