Caitlin Long, the founder of Custodia Bank, has expressed concern over the trend of spot Bitcoin Exchange Traded Fund (ETF) issuers in the United States reducing their fees to near zero. On January 8, she advised clients who are considering purchasing these regulated products to be wary of these extremely low fees, suggesting that they could be indicative of hidden risks.
Long’s warning comes in the wake of recent news that Ark Invest, one of the many applicants for a spot Bitcoin ETF, is offering a fee of just 0.25%. This move to further cut fees follows a similar decision by BlackRock to lower their fees to as little as 0.30%.
In response to these developments, Long has urged clients to be critical, particularly when fees are lower than costs. She emphasized that potential clients should question how asset managers like BlackRock or Ark Invest are profiting from managing the fund. According to Long, with no-fee funds, the answer often lies in securities lending.
Securities lending is a practice where the ETF lends out the Bitcoin it holds in its portfolio to other investors for their use. While this can generate revenue for the ETF issuer, it also exposes investors to the risk that the borrower may not return the Bitcoin.
It is likely that this could be the case, as the SEC is planning to approve a spot Bitcoin ETF backed by actual Bitcoin. This would mean that the issuer, most of whom will hold their coins through Coinbase Custody, will have BTC on their balance sheet.
Long also pointed to a disclosure about Bitcoin ETF trust expenses from the latest BlackRock amendment. The disclosure reveals that several parties must be paid from the trust’s assets, including the ETF issuer, the index provider, and the custodian. Therefore, Long warns that even with ultra-low fees, clients could still end up paying a significant amount in fees.
The competition to attract as many clients as possible could lead to a fee war, with BlackRock, Ark Invest, and other issuers aggressively competing for an edge. As a result, marketing efforts will likely focus on ensuring fees are as low and attractive as possible.
Ahead of the SEC’s January 10 deadline for spot Bitcoin ETF approval, Bitcoin and crypto prices remain firm. Bitcoin reached its highest level since March 2022, breaking above $47,200 on January 9.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | negative |
| Relevance Score | 1 |
| People | Caitlin Long |
| Companies | Standard Chartered, BlackRock, Coinbase Custody, Custodia Bank, Ark Invest |
| Currencies | Bitcoin |
| Securities | None |
