Franklin Templeton cuts fee on spot bitcoin ETF

Spot bitcoin ETF Franklin Templeton Digital Holdings Trust (EZBC) has cut its fee, making it (as of late Friday morning) the lowest among all current issuers. The asset management firm will also waive fees until the fund reaches $10 billion in assets under management.

The newly approved spot bitcoin ETFs collectively saw more than $4 billion in volume on the first day of trading. Sandy Kaul, Franklin Templeton's Head of Digital Asset and Investor Advisory Services, joins Yahoo Finance Live to discuss the company’s involvement in the digital asset space.

Kaul believes that the addition of a spot bitcoin ETF to the company’s suite “provides a new type of alternative exposure” that, ideally, will provide investors the opportunity to diversify their portfolios at a lower rate. Kaul does note there are higher costs that the company will have to absorb, but remains optimistic, “we have confidence, over the long run, that we will raise more than enough assets to be able to offer this really strong incentive early on.”

Kaul acknowledges the concerns and fears that many investors have about investing in bitcoin, stating plainly that “there were bad actors that took advantage of that lack of oversight in the early years,” of bitcoin, but notes regulations will be expanding globally.

Kaul also discusses the “peer-to-peer” nature of the bitcoin industry, stating “this is really the next generation of platform economies” and expects the sector to become more accessible to every sort of investor.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

[AUDIO LOGO]

- This morning Franklin Templeton cutting the fee on its spot. Bitcoin ETF now making it the lowest amongst all current issuers. The manager will also waive fees until the fund reaches $10 billion in assets under management. Now the newly approved spot Bitcoin ETFs as a group saw $4.6 billion in volume in the first day of trading. We want to bring in Sandy Kaul. She's Franklin Templeton's head of digital asset and investor advisory services here. Sandy, it's great to see you.

Let's start with the news out this morning. Franklin Templeton, you guys once again now becoming the cheapest option out there on the street in terms of this spot Bitcoin ETF. Talk to us or walk us through your strategy and how you are sticking out and what has become and will likely even become a more crowded market?

SANDY KAUL: Yeah. So great to be here. First of all, thank you for having me. We really believe so deeply in the potential of the new digital asset space. This is something that Franklin Templeton has been investing in for over five years now. We were the first asset manager to have a registered mutual fund on the blockchain. And this Bitcoin ETF is an exciting new addition to our overall product suite. And we want to be as competitive as possible.

We think that this provides a new type of alternative exposure that investors can have in their portfolio that can really help to diversify their portfolio and give them exposure to a whole new area of technology and growth where innovation is happening every day. So we want this to be as easy to access as possible that's why we have our ticker Easy B.C. And we want our investors to really be as incentivized as possible to invest with us, which is why we want our fees to be the most competitive that we can afford to offer as an asset manager.

- Yes, Sandy, we've seen some creative Bitcoin ETF tickers out there, yours is certainly among them. So ultimately here-- we're taking a look at some of the fees and this is where it gets a little bit more competitive too. What goes into that calculus as a lot of potential investors are trying to wade through who has got the best fee, what these commissions really mean, and where they should place their money.

SANDY KAUL: Yeah. Well, offering these Bitcoin ETFs do involve somewhat higher costs than traditional stock or bond or even gold and commodity ETFs simply because the custody arrangements that you need to think about both for the cash and for the Bitcoin require some nuances that aren't really necessary in some of the more well-known products. So there's a little bit higher cost that we, as an asset manager, have to absorb.

And therefore, what we think about is where do we expect to raise assets, how much assets do we expect to raise. We're very optimistic about our product given our really deep involvement with the digital natives in the space and our really great positioning as a trusted name in asset management. So we have confidence over the long run that we will raise more than enough assets to be able to offer this really strong incentive early on to our customers. And that this will be made up for in the long run but we have to kind of weigh it all off against how much it costs to run the fund and maintain proper discipline. So those are, kind of, the calculations that go into our thinking.

- Sandy we've seen a varying receptance here just in terms of reaction, I should say, on Wall Street as to how open some of these firms are to giving their clients access to these Bitcoin ETFs. Vanguard one of the firms coming out and saying that they will not be allowing clients, most of their clients here to buy Bitcoin ETFs. I'm curious your perspective on that and what that's going to do here in terms of confidence amongst investors of buying into these products.

SANDY KAUL: Yeah. I think that there's sometimes a lot of misunderstanding about what the digital asset space represents. A lot of people think about the very early days of Bitcoin when it was really operating under the regulatory perimeter, and when there really wasn't much oversight in terms of what was happening. And there were bad actors that took advantage of that lack of oversight in the early years of its launch. But we have really seen a significant uptick in the amount of engagement around the world.

In terms of these new assets like Bitcoin, we have regulations coming out in many regions of the world. We're working here in the United States to put in our own regulation and think about what might be required to participate in this space. We've really put into place regulatory tools that are able to monitor wallet activity and really understand when bad actors try and come into the space.

So I think there's been a lot of advancement that a lot of people who aren't paying attention to the space may not be aware of. And they may harbor some early concerns from what Bitcoin, kind of, accumulated as a reputation in its very early years of operation. But a lot of that really has been put to rest, and now this really does represent a network that is creating trillions of dollars of value.

We've actually seen now more transactions in Bitcoin than we've seen in visa or in Mastercard in a given year. So these are pretty substantial ecosystems that are growing very dynamically and they haven't been accessible except for through going directly into the cryptocurrency itself until these Bitcoin ETFs launched and that's what's so exciting about this new product.

- Sandy it's only the second day of trading, but the initial reaction and excitement amongst investors, obviously something to be very encouraged about. And that brings me to what is next for this space, right? Lots of talk about after the launch of these products, could we see another more spot products here for other crypto products? How likely do you think that is?

SANDY KAUL: Well if you think about the innovation that's happening, there's a lot of places where we're seeing that unfold, right. When you think about companies and platform companies, you see lots of companies involved in the platform space, right. And these are network economies that they're running but they're being operated by private companies. Bitcoin is a platform network but it's a peer-to-peer network. So there's not a company that owns it.

And when you think about other equivalent businesses that are growing very dynamically, you have Etherium, you have Solana, you have Polygon, you have other blockchains and you have other ecosystems in the crypto space that are all really creating value within their own participants. They have entrepreneurs building applications in these areas, they're introducing new technologies like Oracle networks, they're using smart contracts, which are self-executing code.

This is really the next generation of platform economies. And we will probably, over time, see many of these opportunities become available to everyday investors through wrappers like an ETF that they find, easy to utilize.

- Thank you so much for joining us. Sandy Kaul who is the Franklin Templeton head of digital asset and investor advisory services. Great breakdown there on all things that we've been tracking around the Bitcoin ETF launches this week. Thanks to you.

SANDY KAUL: Thank you.