As the world of finance continues to evolve, the debate between traditional investment vehicles and cryptocurrencies is heating up. Ben Zhou, the CEO of Bybit, a leading cryptocurrency exchange, has recently weighed in on this debate. Zhou believes that institutional investors should embrace Exchange Traded Funds (ETFs) over Bitcoin. This article explores Zhou’s perspective and the reasons behind his stance.

Understanding the Basics: ETFs vs Bitcoin

Before delving into Zhou’s viewpoint, it’s crucial to understand the basics of ETFs and Bitcoin. ETFs are investment funds traded on stock exchanges, much like individual stocks. They offer a way for investors to buy a diversified collection of assets, such as stocks, bonds, or commodities, in a single transaction.

Bitcoin, on the other hand, is a digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. It is the first and most well-known cryptocurrency, and it operates independently of a central bank.

Why Zhou Advocates for ETFs Over Bitcoin

Zhou’s advocacy for ETFs over Bitcoin is based on several factors. Here are some of the key reasons:

• Regulation: ETFs are regulated by financial authorities, providing a level of security and transparency that Bitcoin lacks. This regulation can protect investors from potential fraud and market manipulation.
• Diversification: ETFs offer a diversified investment portfolio, reducing the risk associated with investing in a single asset. Bitcoin, being a single asset, does not offer this benefit.
• Volatility: Bitcoin is known for its extreme price volatility, which can lead to significant financial losses. ETFs, on the other hand, tend to be less volatile due to their diversified nature.

Case Studies: Institutions Choosing ETFs Over Bitcoin

Several institutions have already started to favor ETFs over Bitcoin. For instance, in 2021, the Ontario Securities Commission approved the launch of the world’s first Bitcoin ETF by Purpose Investments. This ETF allows investors to participate in the cryptocurrency market without the risks associated with holding the actual digital currency.

Similarly, Fidelity Investments, a multinational financial services corporation, has also filed for a Bitcoin ETF. This move indicates a growing institutional interest in accessing the cryptocurrency market through regulated and diversified investment vehicles.

Statistics Supporting Zhou’s Stance

Recent statistics also support Zhou’s stance. According to a report by JPMorgan, institutional investors are shifting their attention from Bitcoin to gold ETFs. The report revealed that since October 2021, Bitcoin funds have experienced outflows, while gold ETFs have seen inflows.

Furthermore, a survey by Fidelity found that 52% of institutional investors prefer to invest in digital assets via investment products such as ETFs, rather than buying and holding the actual digital assets.

Conclusion: The Future of Institutional Investment

While Bitcoin and other cryptocurrencies continue to attract attention, Zhou’s perspective highlights the importance of traditional investment vehicles like ETFs. His viewpoint is supported by recent institutional moves and market trends, suggesting that ETFs may indeed be a safer and more reliable choice for institutional investors.

However, it’s important to note that the financial landscape is continually evolving. As such, institutions must stay informed and adaptable, ready to embrace new opportunities as they arise. Whether that means investing in Bitcoin, ETFs, or a combination of both, will depend on the specific circumstances and risk tolerance of each institution.

In conclusion, Zhou’s advocacy for ETFs over Bitcoin underscores the need for institutions to carefully consider their investment strategies. While the allure of Bitcoin is undeniable, the stability, diversification, and regulatory oversight offered by ETFs make them a compelling choice for institutional investors.

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Coinbase, one of the world’s largest Bitcoin and crypto exchanges, has received approval from the Monetary Authority of Singapore (MAS) to offer Bitcoin buying and selling services to both retail and institutional investors in the country.

This milestone makes official Coinbase’s expansion into the Singaporean market, which has been gradually embracing Bitcoin as an investment option.

The approval granted by MAS enables Coinbase to provide a secure and regulated platform for Singaporean investors to access Bitcoin, and comes on the heels of its approvals in Europe last week. 

Coinbase’s expansion comes at a critical juncture for the company. Since its high-profile IPO in 2021, Coinbase has faced challenges in maintaining its share price amid a volatile crypto market. The company’s stock initially surged post-IPO but has since experienced fluctuations in line with the broader cryptocurrency market.

Coinbase’s expansion into Singapore aligns with its mission to make cryptocurrencies more accessible and user-friendly for individuals and institutions worldwide. The exchange’s reputation for regulatory compliance and security is expected to play a pivotal role in gaining the trust of Singaporean investors.

The move also reflects the broader trend of crypto exchanges seeking regulatory approval and compliance as they expand their services to cater to a wider audience. This approach not only enhances investor protection but also contributes to the legitimacy of the cryptocurrency industry.

Further it follows the exchange’s recent promised addition of the Bitcoin Lightning Network, a second-layer solution designed to improve the scalability and efficiency of Bitcoin transactions.

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Andy Flury is founder and CEO of Wyden, a company providing institutional trading technology for digital assets.

Over the past nine months, Bitcoin has seen a surge of around 50 percent. Blackrock, the world’s largest asset manager, has applied for a BTC ETF. And Germany’s largest credit institution, Deutsche Bank, is currently in the approval process for a crypto custody license. Added to this is MiCA and thus increased regulatory security for institutional investors. All this leads to institutional adoption being at a significant threshold – which makes the decision for the right infrastructure all the more important.

However, things looked quite different in the crypto market last year. In the crypto winter of 2022, Terra-Luna and Celsius stumbled, Three Arrows Capital was ordered to liquidate, major players such as Gemini, Genesis and Grayscale fought legal battles with the SEC, and in November FTX had to initiate insolvency proceedings and the crypto market valuations took a big hit.

In addition, in early 2023, the insolvencies of US banks – Signature, Silvergate, and Silicon Valley Bank – had profound effects on crypto trading, established procedures, and the related venture capital market. This made it clear that the rules of traditional finance, economics and governance did in fact apply to the crypto market.

Looking back now reveals many weaknesses in this market that are currently being addressed. A look into the future shows that the institutional adoption of the new asset class is at an important threshold. Even more so as the EU’s MiCA regime will come into force in less than a year, offering European banks a significant market advantage – especially as the United States is falling behind due to its upcoming presidential election.

Minimizing Counterparty Risk As A Key Issue For Banks

Similar to traditional assets, cryptocurrency trading includes various functions such as custody or brokerage. These are strictly separated from each other in the TradFi sector as part of stringent risk management policies. However, at FTX & Co, this governance principle was ignored, leading to a cascading negative impact and eventual downfall. Banks should therefore ensure that internal governance guidelines exist and are adhered to when connecting to crypto exchanges and other service providers.

As banks chart their digital asset strategy, they confront a market riddled with fragmentation with hundreds of centralized and decentralized crypto exchanges, OTC desks and brokers. To ensure a best execution policy for itself and its clients, which is also required under MiCA, among other things, a bank must connect multiple trading venues to its own platform. These can have large variances in price and liquidity, which can be exploited opportunistically through smart order routing to get the best average price spreading a single order across multiple venues.

Diversification is also advisable in the context of risk management. A singular trading venue’s collapse could spell a catastrophic asset loss. Connecting several trading counterparties increases the complexity and liquidity costs of a bank, but significantly reduces the risk of default. Rigorous vetting of trading counterparties is necessary as part of the due diligence process in order to clarify liability issues in advance. Here, for example, it should be determined who is liable if a downstream trading platform used by a trading counterparty runs into payment difficulties.

After Silvergate And Signature, Importance Of Smart Cash Management

The recent downfall of US banks, Signature and Silvergate, cast a long shadow, affecting not just their clientele but the broader crypto trading ecosystem. These banks had facilitated instantaneous USD transfers to crypto exchanges, thereby minimizing assets held at these venues. Current cash management alternatives, however, seem to be in their infancy.

While stablecoins grapple with volatility and transactional delays, SEPA offers instant liquidity in euros. Yet, its transactional caps and limited market reach pose challenges for institutional trading. And FedNow, the instant payment service launched by the Federal Reserve, has yet to establish itself to achieve the desired network effects. Off-exchange settlement solutions via providers such as Copper ClearLoop or Fireblocks are the most likely to provide an effective means of efficient cash management – allowing funds to be transferred instantly to exchange accounts prior to a trade.

In addition to a centrally managed liquidity pool, the automation of liquidity management is a useful component of smart cash management. Individual functions such as pre-funding, rebalancing or payment settlement are automated. Another modality is dynamic cash management: in this way, money parked with crypto exchanges can be increased during trading hours and reduced or withdrawn completely outside of trading hours.

Trade Lifecycle Orchestration And Seamless Integration

The technical implementation of trading cryptocurrencies requires a bank to connect additional systems to their core banking infrastructure. A custodian suitable for institutional-grade trading secures the private keys that enable safekeeping of client assets. Furthermore, a trade order execution system that can access various crypto exchanges is needed.

Finally, a solution is needed to orchestrate all functions described above, as well as to integrate other functions such as liquidity or risk management. The Wyden platform is currently the only one to offer such a range of functions. In their digital asset strategy, banks must remain attuned to their unique needs, risk profiles, and customer demographics.

Banks As Established And Trusted Access Points

Established financial institutions have clear incentives to further their digital asset strategies. From a bank’s viewpoint, among the four current business cases—crypto, NFT, DeFi, and tokenization—only crypto has consistently demonstrated clear market demand and assured revenue potential for institutions. From a retail or investor perspective, a regulated bank’s digital asset offering presents an elegant solution – bridging the need for security and convenience.

A regulated bank as a “trustee” of cryptocurrencies ensures safekeeping of customers wallets. In addition, access to crypto and digital assets is greatly simplified as the bank acts as a one-stop shop for all asset classes – from traditional to digital assets. Wealth advisors can provide comprehensive risk management education and help with portfolio diversification. The expansion of the bank’s own offering, e.g. via staking, increases customer convenience, provides the bank with valuable data and further touchpoints, and at the same time makes it a central, trustworthy partner.

If banks manage to learn from the mistakes of the past crypto winter, nothing will stand in the way of institutional crypto trading coming of age. The technological prerequisites of a professional and integrated trading ecosystem are there. The task now is to implement them across the board in the banking sector – even more so as MiCA will add increased regulatory certainty for financial institutions.

Considering the evolving landscape, it’s evident that beyond just infrastructure, regulation is pivotal for an institution’s digital asset strategy. This will inevitably lead to diverse regulatory regimes across different regions, significantly influencing their attractiveness. Consequently, for European banks in particular, it’s imperative to not only build internal knowledge and infrastructure but also to stay abreast of these regulatory shifts.

This is a guest post by Andy Flury. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Laser Digital, a subsidiary of $500 billion asset manager Nomura, unveiled its new Bitcoin Adoption Fund today, according to a press release sent to Bitcoin Magazine. Notably, this is just the first in a series of investment solutions that Laser Digital Asset Management plans to introduce to the market.

The Laser Digital Bitcoin Adoption Fund offers long-only exposure to Bitcoin, attempting to stand out as a cost-effective and secure investment vehicle for institutions. To safeguard the fund’s assets, Laser Digital has partnered with Komainu, a leading name in regulated custody solutions for institutional digital asset investors. Komainu was founded in 2018 by Nomura, Ledger, and Coinshares.

This fund operates as a segregated portfolio within Laser Digital Funds SPC, a Segregated Portfolio Company registered as a mutual fund under the Mutual Funds Act with CIMA (Cayman Islands Regulatory Authority).

Heading the charge at Laser Digital Asset Management is Sebastian Guglietta, formerly Nomura’s Chief Scientist Officer and an industry veteran with over 25 years of experience in systematic investment strategies, derivatives, and macro trading.

“Technology is a key driver of global economic growth and is transforming a large part of the economy from analogue to digital,” said Guglietta. “Bitcoin is one of the enablers of this long-lasting transformational change and long-term exposure to Bitcoin offers a solution to investors to capture this macro trend.”

Laser’s Head of Distribution, Fiona King, also brings an impressive track record to the team, joining from Nickel Digital Asset Management and Bank of America Merrill Lynch. Her expertise in institutional business is set to be instrumental in Laser Digital’s growth.

“We’re delighted to now launch our Bitcoin adoption fund, which allows institutional investors a secure path into digital asset investment that is backed by established finance, with the highest levels of risk management and compliance,” King added.

Headquartered in Switzerland, Laser Digital combines the rigor and best practices of global investment banking with the experience of a team that understands the intricacies of the Bitcoin landscape.

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According to a report by Reuters, German banking giant Deutsche Bank has partnered with Swiss cryptocurrency firm Taurus to offer Bitcoin and crypto custody and other related services to its institutional clients.

“As the digital asset space is expected to encompass trillions of dollars of assets, it’s bound to be seen as one of the priorities for investors and corporations alike,” said Deutsche Bank’s global head of securities services, Paul Maley. “Our focus is not just on cryptocurrencies, but supporting our clients in the overall digital assets ecosystem.”

The announcement also comes at a time when regulatory clarity around the industry is improving. Governments and financial regulators worldwide have been working to establish clear guidelines for the use and trading of digital assets.

According to the report, Deutsche Bank is proceeding “cautiously and in line with the spirit and the letter of the regulations governing this asset class.” Maley went on to further explain that “Our product design, and the nature of custody for clients, will make sure that there isn’t the risk of contaminating the bank’s other activities.”

Bitcoin continues to gain momentum and recognition as a legitimate asset class, with the asset becoming a very attractive investment option for hedge funds, family offices, and other institutional investors. Deutsche Bank’s decision to enter this market is seen as a strategic move to capture a share of this burgeoning market.

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In a recent flurry of events indicating growing institutional interest in Bitcoin, Fidelity Investments has refiled its application for a spot Bitcoin ETF. This move comes after several other major players in the financial industry have also made similar filings, cementing Bitcoin’s position as a sought-after asset among traditional investors.

The momentum began with BlackRock, one of the world’s largest asset management firms, filing for a spot bitcoin ETF application. Although they were not the first — ARK Investments and 21Shares had already filed for a spot ETF — they initiated the cascading effect now seen. Investment firms Bitwise and Invesco both refiled for their own spot ETFs, which they had submitted previously.

Shortly thereafter, WisdomTree, an investment management company renowned for its innovative exchange-traded products, filed its own application for a spot Bitcoin ETF. Adding to the now-growing list of firms seeking to launch spot Bitcoin ETFs, Valkyrie Investments joined the race.

Meanwhile, ARK, a prominent investment management firm, amended its 19b-4 filing for a spot Bitcoin ETF, solidifying its position in the race for approval. With the inclusion of a surveillance sharing agreement between CBOE and a crypto exchange (likely Coinbase), ARK’s filing aligns with BlackRock’s strategy and places them at the forefront to potentially be approved first, given their early filing.

However, amidst this competition, Fidelity Investments has reentered the fray by reapplying for a spot Bitcoin ETF. Fidelity, a trusted name in the financial industry, brings its significant expertise and reputation to the bitcoin market, further solidifying the notion that Bitcoin is gaining acceptance among institutional investors.

Jaymes Seyffart, an ETF analyst at Bloomberg, took to Twitter to share his guesses at when the filings may be addressed, noting that the dates for when the filings will be approved or denied are not exact.

This series of events serves as a testament to the growing recognition of Bitcoin’s potential as a mainstream asset class. As more established financial institutions and investment management companies join the race to offer Bitcoin ETFs, it becomes evident that Bitcoin is no longer just a niche investment for early adopters.

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Amid Lebanon’s financial crisis, significant demonstrations have erupted in Beirut targeting financial institutions. Outraged Lebanese depositors, witnessing their savings vanish, have resorted to smashing bank windows, setting fires, and engaging in riots. Simultaneously, leaders of Lebanon’s central bank face grave allegations of fraud, embezzlement, and political corruption.

Lebanese Citizens Left Penniless as Financial Institutions Crumble

In February 2023, Lebanese depositors that were incensed by the alleged theft of their life savings by the country’s central bank, set ablaze the very banks that held their fortunes. Bitcoin.com News highlighted this distressing situation, revealing that regional banks had frozen accounts, leaving residents unable to access their hard-earned funds. As if that weren’t enough, Lebanon was plagued by skyrocketing inflation, further exacerbating the plight of its citizens.

The wave of discontent continued in March 2023 when protests reverberated throughout Beirut and other regions. Outlookindia.com vividly reported scenes of shattered windows, burning tires, and passionate demonstrators venting their anger against Riad Salameh, the governor of Lebanon’s central bank.

Amidst the month of May 2023, resolute demonstrations persist as Lebanese residents grapple with mounting anxiety over the fate of their hard-earned savings. Reports reveal that the bank, in a bid to restore order, enlisted the aid of security personnel and called upon riot police to quell the upheaval unfolding outside the downtown Beirut branch of Bank Audi.

Frustration simmers among Lebanese citizens who find themselves utterly deprived of access to their deposits, with accusatory fingers pointed squarely at Salameh and his brother. Alarming allegations have emerged from six European countries, as detailed by The National, suggesting that Salameh and his brother orchestrated an intricate embezzlement scheme of colossal proportions.

“In Lebanon, it is not one firm or one bank but the whole financial system that collapsed without warning from auditing firms,” The National’s reporter Nada Maucourant Atallah explains. “The crisis exposed losses of almost $70 billion wiping depositors’ savings out and triggering an uncontrolled inflationary spiral, which plunged more than 80 percent of the population into poverty.”

Leaders of Lebanon’s Central Bank Under Fire: Grave Allegations of Fraud and Corruption Surface

According to French court documents reviewed by Reuters, French prosecutors have unveiled their intentions to level preliminary accusations of fraud and money laundering against Salameh. The charges revolve around allegations that he concealed his wealth using purportedly counterfeit bank statements. A scheduled hearing in France on May 16th has been arranged by the French judicial authorities.

Meanwhile, the circumstances faced by ordinary citizens and Lebanese bank depositors persist, leaving them without any funds. The consequences of this predicament have ignited relentless indignation, as people grapple with the urgent need to provide for their families and meet basic necessities such as food and shelter. Lebanese financial institutions have now devolved into mere façades, with hollow bank tellers, vacant ATMs, and fortified buildings standing as bleak reminders of Lebanon’s broken economy.

What are your thoughts on the ongoing financial turmoil in Lebanon and the allegations surrounding the central bank’s governor? Share your insights and opinions in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 7,000 articles for Bitcoin.com News about the disruptive protocols emerging today.