Vanguard, the second-largest asset manager globally, following BlackRock, and major financial advisors such as Merrill Lynch, Edward Jones, and Northwestern Mutual, have announced that they do not plan to provide exposure to eleven newly approved exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). The SEC’s approval of these ETFs was perceived as a pivotal moment for the $1.8 trillion crypto market, offering a potential means to introduce retail investors to a product previously scrutinized by regulators and largely overlooked by Wall Street.
This development, which includes incorporating Bitcoin into a tightly regulated investment vehicle like a spot ETF, allows retail investors unprecedented access to the world’s largest digital asset through their broker-dealers. It eliminates the necessity for investors to qualify as accredited investors, a requirement for participating in the Bitcoin futures ETF launched in 2021.
However, the decision by certain financial institutions to limit access to this new form of cryptocurrency investment has prompted some clients to consider moving to other institutions that do offer this opportunity. One such example is a Coinbase senior engineering manager, Yuga Cohler, who plans to transfer 401K savings from Vanguard to Fidelity due to Vanguard’s stance on Bitcoin ETFs not aligning with his investment philosophy.
Vanguard, responding to a customer inquiry, indicated that the new ETFs do not align with the asset manager’s investment philosophy, citing crypto’s speculative and unregulated nature. Internal communications at Merrill Lynch revealed the company’s current policy prohibits investment in Bitcoin spot ETFs, although it has left room for potential policy changes in the future. Edward Jones and Northwestern Mutual have also joined the BTC ETF ban.
Despite the customary due diligence performed by firms on individual ETFs before offering them to clients, the reluctance of Vanguard appears to be influenced more by the nature of the asset itself than the ETF’s performance, according to Dave Weisberger, CEO of CoinRoutes. Vanguard emphasized its commitment to assisting investors in generating positive real returns over the long term, asserting that offering such speculative and unregulated assets contradicts this goal. Representatives from Merrill Lynch, Edward Jones, and Northwestern Mutual did not respond to requests for comments.
