Crypto ETF filings in the US creep up as BNY Mellon’s Slavin comments on servicing the First Trust SkyBridge product
The latest crypto ETF in the US news brings us the announcement of a ninth filing for a bitcoin tracker, this time from Galaxy, which is already trading a crypto product on the Toronto Stock Exchange.
Meanwhile, BNY Mellon announced that it had been named in the initial registration statement as a service provider for the First Trust SkyBridge Bitcoin ETF Trust, a newly created bitcoin ETF that is currently pending approval by the US’s SEC.
It is envisaged that after the completion of definitive service provider agreements and the SEC’s final approval of the ETF, BNY Mellon will provide services including ETF basket operations, order taking, fund accounting, fund administration and transfer agency services.
Ben Slavin, Global Head of ETFs, Asset Servicing, BNY Mellon, says: “The queue is forming rapidly and there is a long history with respect to these filings and a renewed sense of optimism that the SEC will approve these products, given the change in the Administration and also the market structure changes around digital assets.”
BNY Mellon has history with the many attempts to get a crypto, specifically bitcoin, ETF through the regulatory hurdles, having supported other attempts since 2018, while the first application for a bitcoin ETF was made back in 2013.
“We have the experience before of servicing these products and we have been named in previous filings from the last few years,” Slavin says.
“From an asset servicing standpoint, the accounting, administrative and ETF services - the piece of ETF servicing behind the creation and redemption functions and the management of authorised participants – is very similar to our existing platform.”
For Slavin, crypto is close to commodities, specifically precious metals. “BNY is the dominant player in the precious metals space for legacy reasons, as well as winning additional mandates over the years,” Slavin says. “The ‘physical’ bitcoin products will look very similar to 33 act metals products that we service today.”
The complicated part, he says, is the custody with the digital asset itself, that is where the real difference comes in. Providing custody for bitcoin is very different from gold or an equity or other security he comments.
The existing Canadian products have worked with BNY Mellon’s ETF servicing affiliate in Canada, and the independent crypto custodian Gemini. Meanwhile, BNY Mellon is working on establishing its own digital asset custody business.
“We think we are well positioned with this ETF,” Slavin says. “But it’s very hard to speculate what the SEC is going to be concerned about or what the catalyst might be.
“But in prior commentary, the SEC laid out several different issues that needed to be resolved and my belief is that many of the issues have been resolved over a period of time.”
While working out what will be the magic ingredient that lets the SEC grant approval to one of the nine crypto ETFs on its books is hard, the strong feeling is that the building of proper infrastructure and controls in the space will support the applications.
Whoever cracks the code will see significant business.
“The market keeps indicating that it wants a bitcoin ETF,” Slavin says. “Clearly there is quite a bit of hard data and anecdotal data that indicates the market is demanding these products and in Canada we saw a phenomenal success in those products with significant demand for other bitcoin related exposures such as GBTC and in the futures markets.
“It is a matter of once the product is in the market place, it is clear there will be significant demand for a digital asset tracker.”
Commenting specifically on the First Trust SkyBridge product, Slavin says: “We are very excited about the First Trust SkyBridge product. First Trust, we have a long history with, and SkyBridge is a well-known name in our space that will help with the management and distribution and marketing which will be important differentiators.”