Mission to Establish Bitcoin ETF is Still Going, As California Asset Manager Figures Out a Loophole
The concept of a Bitcoin ETF has been keeping investors in the cryptocurrency world encouraged and enthused that the bear market is not permanent, and that salvation is coming.
When VanEck decided to pull their application amid the government shutdown, many investors became worried about the impact it could have. Still, one asset manager in California believes that there is a sneaky way to bring bitcoin into this type of exchange-traded fund, saying that it’s the best chance of getting crypto approved through the Securities and Exchange Commission.
Reality Shares was the catalyst behind one of the first ETFs in the tracking of the blockchain market, as The Block notes.
Working towards this Bitcoin ETF, the firm filed a prospectus, which included the option of listing a fund of currencies with bitcoin futures on the list. By getting this prospectus approved, the firm would be offering the first fund that makes it possible to be directly exposed to the crypto market, and would list the New York Stock Exchange’s Arca, which is an exchange of its own.
In the final draft, the management of the ETF will “provide investment exposure to global currencies, both fiat and virtual currencies, that have been widely adopted for use.”
Approximately 15% of the total assets of the fund would be trading on Cboe Global Markets and CME Group as bitcoin futures. Furthermore, it may be able to invest in contracts in the future that deal with other bitcoin futures marketplaces.
Eric Ervin, the CEO for Reality Shares, commented, “The SEC doesn’t want to approve a full-blown crypto ETF, but this limits exposure to 15%.”
The firm recently launched a blockchain funds that follows the different companies in the crypto industry back in 2018.
So far, the SEC has been filled with rejections against funds that have to do with anything cryptocurrency-related, bitcoin-related, or even bitcoin futures-related. Most of their rejections have to do with the volatile market, and the substantial risk they see of manipulation in the spot market. The SEC has also cited a lack of liquidity.
Even though the new fund is clear about the risks associated with the investment of bitcoin and cryptocurrency, the new fund would make it so there is less exposure to the crypto asset. By limiting exposure, Reality Shares hopes that SEC will be less concerned with the risks and move towards the approval of their prospectus.
The prospectus says, ““Bitcoin exchanges have a limited history. Since 2009, several bitcoin exchanges have been closed or experienced disruptions due to fraud, failure, security breaches or distributed denial of service attacks a/k/a ‘DDoS Attacks.’”
A year ago, SEC Commissioner Dalia Blass spoke on the concerns that the agency had about a fund that is tied in with bitcoin futures, placing the blame on crypto exchanges. The letter Blass issued said,
“In addition, a number of recent media reports have highlighted a range of possible vectors for potential manipulation of cryptocurrency markets,” the letter said. “Although some funds may propose to hold cryptocurrency-related products, rather than cryptocurrencies, the pricing, volatility and resiliency of these derivative markets generally would be expected to be strongly influenced by the underlying markets.”
At this point, what Reality Shares is offering is simply renewed hope for a community that has already put their faith in many firms to already apply for Bitcoin ETFs, like VanEck, Gemini, and Bitwise.
SEC Commission Robert Jackson seems optimistic that the agency’s requirements will ultimately be met in the long run.
Jackson said, “I’m happy to say market participants have begun to come in with ideas. Whether or not we’re going to find one that really protects investors I don’t know, but I do know that that [Winklevoss] case wasn’t especially close.”