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January 22, 2024

Unlikely crypto appeal: spot bitcoin ETFs won’t sway banks’ interest.

Banks and investors are unlikely to be enticed by spot bitcoin ETFs despite their recent approval by the Securities and Exchange Commission (SEC). The approval of 11 ETFs tied to the price of bitcoin does not change the attitudes of most banks towards cryptocurrencies, according to Joseph Silvia, a financial institutions attorney and former counsel at the Federal Reserve Bank of Chicago. Silvia predicts that banks will continue to stay away from the crypto market and will only engage with it indirectly through their custody business. He also highlights that the economic and banking environment is not conducive to investing in bitcoin ETFs, and that regulators are hesitant to see banks engage further with cryptocurrencies. Silvia believes that banks are more focused on funding and liquidity challenges following the March 2023 failures and slower economy. Additionally, the lack of a futures market for most cryptocurrencies presents a risk for potential sponsors of new crypto ETFs. However, others are more optimistic and see potential for the market to develop a range of bitcoin-related investment products.