Banking Associations in America, including The Bank Policy Institute, American Bankers Association, The Financial Services Forum, Security Industry and Financial Markets Association have sent an official letter to the Securities and Exchange Commission regarding regulations on Bitcoin ETF.
The open letter states that Banks in America want to have looser regulations on Bitcoin ETF so that they can release their own products regarding Bitcoin.
Banks Want in on Bitcoin ETFs
This “complaint” comes from the condition where most of the issuers are non bank-financial institutions and that banks are not getting any involvement because of regulations.
Banks are usually at the forefront when issuing new financial products, especially regarding exchange traded products, one of which is an exchange traded fund.
Because of regulations regarding cryptocurrencies in the U.S. and the definition of crypto assets in those regulations, banks are limited to access or issue a product related to crypto.
Which is why on February 14th, 2024, most banking associations in America such as The Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association came together and wrote a letter to the SEC, specifically to The Chairman, Gary Gensler.
The main complaint was that banks are excluded from being able to issue a Bitcoin related product in the regulation approving Bitcoin ETFs.
Out of all the approved companies that had requested to issue a Bitcoin Spot ETF, none of them were banks, which made the banking association a bit frustrated, especially since the demand has been moving higher and higher.
Through the letter, those banking associations requested that The SEC consider modifying the regulations that was issued in March 2022 regarding crypto asset custody for retail and institutional investors.
The regulation limits banks from offering crypto related products because it obligates them to hold crypto on their balance sheet. Because of this obligation, banks have higher cost to hold crypto for customers, making it hard for them to scale and issue larger crypto related products that would gain massive interest from the public, such as the Bitcoin ETF.
Also in that letter, the banking associations also requested that The SEC exclude tokenized assets from being categorised into crypto assets so that they have less limitation when trying to create real world assets products through blockchain technologies.
All of this request seems to come suddenly after the demand for crypto related products surged higher and also the narrative of the bull market started to rise again.
Bitcoin ETF Transaction has Skyrocketed
The overall transaction volume of Bitcoin ETF has been skyrocketing with the Spot Bitcoin ETF itself having an average of more than $1 Billion transaction per day according to data from TheBlock.
The rising interest seems to come from institutional investors that have been limited by regulation to purchase Bitcoin directly, hence using assets like Bitcoin ETF to get a taste of the so-called “volatile but profitable” crypto asset.
Overall the cumulative transaction volume has also been increasing over time with no signs of slowing down since its launch in 2023.
Overall the accumulative transaction volume of Spot Bitcoin ETF has reached a total of $41.72 Billion, which is a huge accomplishment considering it is still new.
Futures Bitcoin ETF has also been increasing, but compared to the Spot Bitcoin ETF it’s volume is not even close, even though it launched first.
When looking at the overall Bitcoin ETF volume 80% of the ETF transaction comes from the Spot Bitcoin ETF while 20% comes from the Futures Bitcoin ETF.
This shows that most investors prefer the Bitcoin Spot asset rather than its derivatives, and probably the main goal of purchasing it is because they are limited by regulations and not because they want the volatility, hence why the Spot Bitcoin ETF is more attractive to them.
The FOMO around banks can be seen as a positive sign heading into the predicted bull market of 2025. If somehow the request from banking associations are granted by the SEC, the crypto market can see a huge influx of buying volume that can trigger a significant price increase, probably then will be considered the start of the bull market.
