A Professional Approach to Crypto Asset Management
San Francisco • December 6, 2022
Investors have an ever-increasing number of ways to invest in crypto. The recent high-profile bankruptcies of online crypto platforms have highlighted the risks investors face in navigating those choices. Bitwise’s clients are professional investors, which include RIAs, banks, broker-dealers, institutions, investment managers, and family offices, each with high standards and important responsibilities to their own clients and trustees. The Bitwise suite of funds and products is built specifically to meet their standards. Here, we wanted to outline what constitutes a professional approach to asset management in crypto and the measures Bitwise takes to protect client funds.
1) Secure Custody of Assets
Bitwise safeguards assets with U.S.-regulated, third-party institutional custodians.
Bitwise funds custody assets with leading providers, including Coinbase Custody Trust Company, Fidelity Digital Assets, Anchorage Digital Bank, and Gemini Trust Company. These custodians are either New York State-chartered trusts, with oversight provided by the New York State Department of Financial Services, or federally chartered banks regulated by the Office of the Comptroller of the Currency. Assets are segregated and stored securely with state-of-the-art technology. Bitwise does not permit the lending of any crypto assets in its crypto index funds. As a crypto specialist, Bitwise rigorously monitors and evaluates both current and prospective providers. For traditional assets held in Bitwise funds, custodians include the Bank of New York Mellon and Brown Brothers Harriman & Co.
2) Professional Trade Operations
Bitwise uses institutional trading desks to keep assets safely held during trading and to minimize exposure to exchanges.
Using crypto exchanges to trade introduces risk as it requires moving assets into exchange accounts to facilitate transactions. Bitwise instead prioritizes using over-the-counter trading desks, where the assets do not need to leave custody until settlement occurs. When trading on exchanges is necessary, Bitwise only works with domestic U.S. platforms and limits the total exposure. Navigating this dynamic is key to professional management of crypto assets.
3) Third-Party Oversight
Bitwise works with auditors, administrators, and tax professionals to add third-party verification and oversight.
Registered accounting firms, including a Big Four auditor, conduct audits of fund financial statements annually, providing assurance that the books and records are free from any misstatements, whether due to fraud or error. Fund administrators perform third-party verification of holdings and create independent financial reports. Fund tax preparers conduct reporting in compliance with applicable laws and regulations.
4) Regulatory Oversight
Bitwise operates under SEC and FINRA oversight for applicable portions of its operation, adding important oversight and transparency.
Bitwise operates an SEC-registered investment adviser for applicable funds and has registered representatives supervised by a FINRA-registered broker-dealer. In accordance with the requirements of the Securities Act of 1933, the Securities Exchange Act of 1934, and/or the Investment Company Act of 1940, certain Bitwise funds file required disclosure documents and meet regular public reporting obligations.
5) Expertise
Bitwise’s team of over 70 professionals brings together decades of experience in technology, asset management, and regulatory compliance.
From fast-moving counterparty events, to evaluating crypto asset design, to performing diligence on counterparties, Bitwise has a track record of navigating risks and key decisions successfully across multiple market cycles. Bitwise prioritizes partnership with clients, with a large team of client specialists to help them understand developments in crypto and equip them to be successful with their own clients and trustees.
Crypto and public blockchains continue to evolve rapidly, bringing valuable opportunities for professional investors, but also new risks and complexity. Professional solutions and expert partnerships are more important than ever. At Bitwise, that’s our sole focus, as it has been since our founding more than half a decade ago.
About Bitwise
Bitwise Asset Management is the largest crypto index fund manager in America. Thousands of financial advisors, family offices, and institutional investors partner with Bitwise to understand and access the opportunities in crypto. For six years, Bitwise has established a track record of excellence managing a broad suite of index and active solutions across ETFs, separately managed accounts, private funds, and hedge fund strategies. Bitwise is known for providing unparalleled client support through expert research and commentary, its nationwide client team of crypto specialists, and its deep access to the crypto ecosystem. The Bitwise team of more than 60 professionals combines expertise in technology and asset management with backgrounds including BlackRock, Millennium, ETF.com, Meta, Google, and the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and has been profiled in Institutional Investor, Barron’s, Bloomberg, and The Wall Street Journal. It has offices in San Francisco and New York. For more information, visit www.bitwiseinvestments.com.
