Regulatory restrictions prevent wealth management companies from investing in bitcoin and expect sec to approve the first bitcoin ETF

Since the beginning of this year, the sharp rise and fall of bitcoin has not dampened Jim Paulsen’s enthusiasm for cryptocurrency. However, due to regulatory restrictions, Paulson, chief investment officer of leuhold group, which manages $1bn of assets, is unable to hold bitcoin in his client’s portfolio. That put him out of the way and saw the world’s most popular cryptocurrency soar more than 900 per cent since its low volatility trading in March last year and a drop of more than 20 per cent in just a few days. “What I like about bitcoin is that it’s very independent of its correlation with stocks and other assets,” Paulson said, still frustrated that bitcoin couldn’t be available for customers. A possibility of asset classes that behave differently from stocks or bonds is allowing portfolios and wealth managers to hold cryptocurrencies as much as possible. Many people think that bitcoin is a good inflation hedge. A Citigroup report shows that nearly 20% of consultants are considering investing in cryptocurrency this year, up from 6.3% in 2019, due to inflation concerns. Still, some advisers say they cannot hold bitcoin for their clients unless ETFs or mutual funds can remove the common legal barriers to any investment. Wall Street analysts believe that if this happens, institutional capital may flow in, continuing to push up the cryptocurrency. BlackRock, the world’s largest asset manager, said on January 21 that it would increase bitcoin futures as a qualified investment for specific funds. Fund experts expect other asset management companies to follow suit. Robert Jenkins, head of global research at refinitiv Lipper, said the SEC has yet to recognize cryptocurrencies as securities such as stocks or bonds, and has not ruled on whether mutual funds can own them directly. Since mutual funds do not need to disclose whether they hold bitcoin, it is not clear whether any mutual funds hold such assets. Todd Rosenbluth, head of exchange traded fund and mutual fund research at CFRA in New York, said eight U.S. companies have tried to create bitcoin exchange traded funds (ETFs) since 2013, but none of them succeeded. So far, the SEC has not commented on the report. Funds holding bitcoin positions, such as the popular ark invest ETF series, hold bitcoin indirectly by holding shares in the grayscale bitcoin trust. Gray bitcoin trust is a kind of public trading trust, which holds a certain number of bitcoin units, and the transaction price is often higher than the value of its underlying portfolio. Canadian securities regulators approved the world’s first bitcoin exchange traded fund on February 12, prompting some investors to hope that US regulators will soon follow suit. Gary Gensler, chairman of the securities and Exchange Commission nominated by President Biden, spoke broadly about the crisis at a confirmation hearing on Tuesday, suggesting that the Commission should provide more regulation on how to look at the asset class of cryptocurrency. Some investors believe his appointment increases the likelihood that bitcoin ETF will be approved in the US. “Gensler seems to prefer cryptocurrencies to previous regulators,” says Viraj Patel, head of asset allocation at fiduciary trust international He has not yet invested in the asset class for clients, but is waiting for exchange traded funds in the US. “We really look at cryptocurrency in terms of what might be gold 2.0.” However, rosenbroos said he remained skeptical about the idea that such products could be approved this year, saying the threshold related to market manipulation and regulatory review was high. Even without ETFs, retail interest “remains strong and shows no signs of abatement,” JPMorgan analysts said in a Feb. 16 research paper Overall, crypto digital money funds and products that investors can buy directly bring in nearly $5.6 billion in assets in 2020, up more than 600% from the previous year, according to coinshares, an asset management firm. As of March 1, the cryptocurrency fund had raised $4.2 billion this year, coinshares said. “Not being allowed to buy cryptocurrency frustrates many advisers, but it’s a highly volatile asset and many investors end up doing it themselves,” said Jimmy Lee, chief executive of wealth consulting group. Source: Tencent Technology

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