Crypto for Advisors: Crypto Products

Beyond traditional ETF metrics, several factors are more specific to crypto‑based products.

Digital asset custody. Holding bitcoin requires specialized custody arrangements, a relatively new function within asset servicing. While early infrastructure was largely developed by crypto‑native firms, traditional custodians have increasingly entered the space. Custody practices, regulatory status and bankruptcy protections can differ across providers, making it prudent to understand how and where digital assets are held.

Sponsor profile. The issuer’s background may also warrant consideration. Crypto‑native sponsors and traditional financial institutions may operate under different regulatory frameworks and governance standards, which can influence risk management, operations and investor protections.

Benchmark methodology. The growth of digital asset products has led to the emergence of new benchmark providers. Evaluating a benchmark’s construction—such as exchange inclusion criteria, pricing methodologies and review processes—can be important. A poorly designed benchmark may diverge from broader bitcoin pricing, potentially affecting tracking outcomes.

Bringing it together

In a developing asset class, the structure and design of an ETP can be as consequential as the exposure it seeks to provide. Beyond headline fees, evaluating custody frameworks, sponsor profiles, benchmark methodologies and execution characteristics may help investors better understand potential costs and risks. As the market for crypto ETPs continues to evolve, a disciplined and holistic due diligence process remains essential.

- Sarah Cummings, executive director, ETF Strategist, Morgan Stanley Investment Management

Important risks and disclosures.

Ask an Expert

Q: Do I need to move my bitcoin to get a loan against it?

In many cases, yes — centralized lenders typically require custody of your bitcoin for the loan's duration. However, structures vary across platforms, so it's worth understanding who holds your assets and how they're protected before committing.

Q: What's the main risk advisors should flag?

Margin calls. If bitcoin drops sharply, clients may be forced to post additional collateral or face liquidation — often at the worst time. That forced sale can also trigger a taxable event, compounding the loss.

Q: Should I do this instead of selling some of my position?

It depends on conviction. If you believe bitcoin appreciates, borrowing preserves that upside while meeting liquidity needs. But if you're uncertain about the position, adding leverage isn't the answer — sometimes a clean sale is the simpler move.

- Ryan Tannahill, Investment Advisor Representative, iA Privabecoming

Keep Reading

• The U.S. Senate Banking Committee advanced its crypto market structure bill, the Clarity Act, to the Senate floor on Thursday, bringing it a step closer to passing it into law.
• Japan's Financial Services Agency recognizes foreign-issued stablecoins as electronic p.yment methods under domestic law, effective June 1.
• Bank of England Deputy Governor Sarah Breeden says the BoE will publish draft stablecoin rules next month and finalize them by year-end.