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Ethereum solana gas fees

Spot Bitcoin ETF Issuers Are Rushing To Slash Fees, Be Careful

Dalmas Ngetich
by Dalmas Ngetich
1 year ago
·
Posted in Bitcoin News
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Caitlin Long, the founder of Custodia Bank, is sounding the alarm about the race by spot Bitcoin Exchange Traded Fund (ETF) issuers in the United States to slash fees to near zero. Taking to X on January 8, the founder urged clients planning to buy these regulated products to be cautious about these ultra-low fees, as they could indicate hidden risks.

The Spot Bitcoin ETF Fee Race Is A Concern

Long points to the recent news that Ark Invest, one of the multiple spot Bitcoin ETF applicants, is offering a fee of 0.25%. The decision to further slash fees follows BlackRock’s move to drop theirs to as low as 0.30%. 

In response, the founder analyzed that clients should be critical, especially when fees are lower than costs. Most importantly, Long continued, prospective clients should ask how the asset manager, in this case, BlackRock or Ark Invest, is making money managing the fund. With no-fee funds, the answer, the founder added, is often on securities lending.

Usually, securities lending is a practice where the ETF lends out the Bitcoin it holds in its portfolio to other investors, who then use it for their purposes. This can generate revenue for the ETF issuer but also exposes investors to the risk that the borrower will not return the Bitcoin. 

Related Reading: Can Bitcoin Break The Bank? Standard Chartered Sees Crypto Hitting $200K Next Year

It’s quite probable that this could be the case, as the SEC plans to approve a spot Bitcoin ETF that actual Bitcoin will back. This means that the issuer, most of whom will hold their coins through Coinbase Custody, will have BTC on their balance sheet.

Blackrock amendment on trust expenses | Source: Caitlin Long on X
Blackrock amendment on trust expenses | Source: Caitlin Long on X

Beyond this possibility, Long also cites 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. Accordingly, Long cautions that even with ultra-low fees, there is a possibility that clients will pay a significant amount of money in fees.

Related Reading: Ripple Becomes Gold Sponsor For The Digital Euro Conference

The Fee Race Will Continue, BTC Rallying

The desire to onboard as many clients as possible might lead to a fee war where BlackRock, Ark Invest, and other issuers will aggressively compete for an edge. For this reason, marketing will mean ensuring fees are low and attractive as possible.

Bitcoin price trending upward on the daily chart | Source: BTCUSDT on Binance, TradingView
Bitcoin price trending upward on the daily chart | Source: BTCUSDT on Binance, TradingView

Ahead of the SEC’s January 10 spot Bitcoin ETF approval deadline, Bitcoin and crypto prices are firm. Bitcoin rose to March 2022 highs, breaking above $47,200 on January 9.

Feature image from Canva, chart from TradingView
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Dalmas Ngetich

Dalmas Ngetich

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Dalmas is an experienced journalist with over a decade in Forex, general finance, technology, and blockchain developments. He is currently a crypto reporter for Bitcoinist, where he covers DeFi, blockchain, DeFi, and latest industry news. His work and that of his partners have been featured in top news outlets, including Forbes, investing.com, CoinTelegraph, and Entrepreneur, among others. He is passionate about technology and politics and is always on the lookout for the latest trends in these fields. He also loves spending time with his family and friends, exploring nature, and traveling to new places. Connect on X: @Dalmas_Ngetich, or message him directly on Telegram here: @Dalmas_Ngetich.

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