Broker-dealers and bitcoin ETFs: To sell or not to sell?

investmentnews.com:

Now that buying and selling bitcoin has evolved to encompass exchange-traded funds that invest in the digital asset, broker-dealers will inevitably ponder the Shakespearian question about a bitcoin ETF: to sell or not to sell?

On Wednesday, the Securities and Exchange Commission at long last approved spot-price bitcoin ETFs, although as InvestmentNews noted, it did not do so entirely willingly and will all but certainly be watching product providers very closely.

Will broker-dealers, which are the gatekeepers for hundreds of thousands of financial advisors with millions of retail clients, allow their brokers to sell or recommend a notoriously volatile, speculative financial instrument?

Broker-dealers typically have tight restrictions on trading volatile products such as futures and options contracts, which require special training at many firms. Volatile alternative asset classes, including currencies and metals, also face strict limitations in client portfolios.

It’s far too early to tell what the eventual use of bitcoin ETFs will be at most firms, as due diligence and compliance staff are just now taking a look at the dozen or so products that broker-dealers could sell. Regardless, the spot bitcoin ETF is coming to broker-dealers, one executive noted.

“It’s probably inevitable, maybe in a few weeks, we’ll have to approve one or two of these bitcoin ETFs due to a small but vocal minority of financial advisors within the salesforce who are devoted to it,” said the senior brokerage executive, who asked to speak confidentially. “It’s like a gold allocation in a portfolio for those advisors: 2% to 3% of a client’s assets and it’s not correlated.”

“But not everyone has done the due diligence on these funds,” the