Today’s the day that trading starts in Ether ETFs following the long awaited approval by the SEC yesterday. Eight of the nine ETFs have the cryptocurrency held in custody by Coinbase Custody. The only exception is Fidelity Digital Assets, which is looking after the cryptocurrency that underpins the Fidelity ETF. Hence, there are no bank custodians looking after the cryptocurrencies.
This is despite a reported recent relaxation of rules that previously blocked bank custodians. Either the rule relaxations came too late for these ETFs. Or the ETF issuers decided to stick with the same custodians they used for their Bitcoin ETFs.
In theory, the SEC’s accounting rule SAB 121 blocks banks from custody because it forces them to include the cryptocurrency on their balance sheet. Given cryptocurrencies are considered high risk, the banks would have to set aside a lot of capital, making custody too expensive.
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