While crypto enthusiasts see blockchain-based currencies as an alternative to the mainstream financial system, traditional financial firms may be the main beneficiaries of investor appetite for these new assets.
On October 19, the ProShares Bitcoin Strategy ETF launched on the New York Stock Exchange amid great fanfare.
These new ETFs – and others like them elsewhere – hold futures contracts that track the price of Bitcoin, rather than holding the coins directly.
With the launch of Bitcoin futures ETFs, however, the market is now open to a greater range of investors, including retirement accounts such as 401s and IRAs.
As mainstream investors move assets into crypto markets and Wall Street firms launch crypto-linked products, regulators are taking these assets more seriously.
However, some digital tokens have been defined as securities – the SEC, for example, has charged Ripple with conducting an unregistered digital securities offering by selling its coin XRP.
Recently, for example, the CFTC has been increasingly aggressive in its oversight of crypto markets – in October it fined Tether, an issuer of a US dollar-linked stablecoin that has a close relationship with Bitcoin, $41 million for making false and misleading statements about its reserves.
Even though regulators don’t yet allow traded funds to directly hold coins, derivatives products that track cryptocurrencies and other digital assets offer a regulator-approved – and, for Wall Street firms, highly lucrative – avenue for crypto investment.