NYDIG Secures SEC Approval To Offer Cash-Settled Bitcoin Futures To Institutional Investors
The US Securities and Exchange Commission (SEC) gave approval to the New York Digital Investment Group (NYDIG) to provide institutional investors with shares of a Bitcoin (BTC) futures fund.
A filing published by SEC on Monday is saying the NYDG Bitcoin Strategy Fund is a Stone Ridge Trust VI portfolio fund that will invest in bitcoin futures settled in cash and that are traded on Commodity Futures Trading Commission (CFTC) registered exchanges. The fund won’t invest in Bitcoin or other cryptocurrencies directly, as the filing says:
“The Fund will seek to purchase a number of Bitcoin futures so that the total value of the Bitcoin underlying the Bitcoin futures held by the Fund is as close to 100% of the net assets of the Fund (the “Target Exposure”), as it is reasonably practicable to achieve.”
Also, there’s no assurance the fund will achieve or keep up the Target Exposure.
NYDIG Is Looking to Raise $25 Million
NYDIG got a New York Department of Financial Services limited purpose trust charter and a BitLicense last year. It’s looking to raise not less than $25 million with the new fund. CME exchange is the only one in the US offering cash-settled Bitcoin futures contracts, while Bakkt is looking to do the same on ICE Singapore starting next week.
SEC May Have Changed Its Stance on Cryptocurrency Fund Products
As everyone knows, the SEC was never too keen on approving crypto fund products like exchange-traded funds (ETFs). The NYDIG approval from Monday may indicate it has changed its stance. The director of the Investment Management Division at SEC, Dalia Blas, has made a reference to the fund in one of her speeches from earlier this week. She called it a “prime example” when it comes to the agency engaging in new products. This is what she further had to say:
“Last year, I issued a public letter calling on the fund industry to engage in a dialogue on the investor protection and substantive issues presented by such investments.”
The issues of a Bitcoin cash-settled futures contracts fund are usually related to custody, valuation, liquidity, potential manipulation, and arbitrage efficiency.
“As a result of this engagement, we are at the point that a registered closed-end interval fund with a Bitcoin futures strategy is preparing to launch,” Blass continued.
While she didn’t mention NYDIG by its name, she did mention the fund is going to invest in cash-settled Bitcoin futures, so it wouldn’t have to face custody issues while valuing its holdings at the settlement price determined by a CFTC-registered exchange for futures. Meanwhile, SEC Commissioner Hester Peirce, aka ‘Crypto Mom' said the approval is a “bit of progress”. NYDIG didn’t make any comment when it came to the fund.