The recent approval by the SEC of spot Bitcoin ETFs was nothing short of historic, offering a new avenue for safe and compliant access to the largest cryptocurrency. Since January 10, there have been over $10 billion in inflows, helping drive a favorable outlook for Bitcoin and the broader market. For retail investors especially, spot Bitcoin ETFs simplify access to Bitcoin backed by secure custody while removing the complexity of managing private keys themselves.
With rising interest in crypto, Bitcoin ETFs raise new questions for institutions managing client assets: How should we meet client demand for digital asset exposure? What investment vehicles are best?
If the new ETFs are part of the answer, so is the complementary investment vehicle of crypto separately managed accounts (SMAs). Crypto SMAs, or portfolios of digital assets, are quickly gaining ground with wealth managers, family offices and registered investment advisors (RIAs).
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Why Crypto SMAs?
SMAs have long been a key investment vehicle across a variety of traditional asset classes, from equities to fixed income. The SMA structure allows for direct ownership of — not just direct exposure to — the underlying asset.
Crypto SMAs give access to a wide range of assets beyond bitcoin. Multi-asset support allows institutions to meet client demand for a greater depth of exposure to crypto, especially novel protocols or tokenized RWAs.
In addition, crypto SMAs are easy-to-tailor to different client types and strategies. If, for example, a family office wanted to allocate 60% of a portfolio to Bitcoin and 40% to Ethereum, an SMA could be tailored to this allocation as a streamlined avenue for crypto exposure.
Much like spot Bitcoin ETFs, crypto SMAs provide institutions with the regulatory and security profile they need to engage in the asset class. To safeguard assets, a qualified custodian should serve as the base layer of a compliant-crypto SMA.
Qualified custodians are required to segregate accounts and cannot commingle assets. And a recent SEC proposal has emphasized the importance of qualified custodians across asset classes, including…
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