Many investment firms have launched crypto exchange-traded funds, but so far, none has found favor with the United States Securities and Exchange Commission. Firms keep trying, though, and this past week, two more tendered applications for crypto ETF-like products — if not pure-play Bitcoin ETFs have emerged.
WisdomTree, an asset manager and ETF specialist, filed an N-1A form registration statement on June 16 with the agency for an ETF that would invest up to 5% of its portfolio in cash-settled Bitcoin (BTC) futures contracts offered by Chicago Mercantile Exchange.
WisdomTree was close to applying to the SEC in January for a regulated stablecoin — something seen at the time as a possible stalking horse for a crypto ETF bid. Now it has actually gone that route, but with a BTC component so small the SEC may scarcely notice — or care. Derek Acree, a co-founder and legal counsel at DeFi Money Market — a decentralized financial ecosystem — told Cointelegraph: “This is not a new tactic but, instead, a calculated plan to explore exactly what the regulators’ thresholds are.”
“I wasn’t surprised about the WisdomTree filing yesterday,” Eric Ervin, the president and CEO of Blockforce Capital, told Cointelegraph. “We filed for a similar concept last year.” That application was for Reality Shares ETF Trust, an exchange-traded fund proposing to invest in a portfolio including both sovereign debt instruments and Bitcoin futures (up to 25% of total assets). Reality Shares subsequently pulled its application on SEC advice. Ervin told Cointelegraph:
“Bitcoin deserves a place in a diversified portfolio, and if the SEC continues to block this, they are essentially encouraging investors to seek that exposure through other, potentially less-regulated means.”
Wilshire Phoenix goes the trust route
Meanwhile, on June 12, investment firm Wilshire Phoenix applied to the SEC for — not an ETF — a grantor trust, which has a different application process. However, like a crypto ETF, it allows for a publicly traded Bitcoin fund covered by the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC has already approved such a trust for Grayscale Investments.
James Angel, a professor at Georgetown University’s McDonough School of Business, told Cointelegraph that getting a trust approved by the SEC is easier than getting an ETF approval “as long as you’re disclosing everything, all the risk factors.” Wilshire Phoenix’s SEC S-1 form filing has “a totally different set of approvals” with a different set of bureaucrats casting judgment. He added: “I don’t see that the SEC has legitimate means to turn it down.”
Wilshire Phoenix, too, had earlier applied for an ETF — again, a mix of Bitcoin and short-term treasuries that used the bills to cushion against crypto volatility. Its application was officially rejected by the SEC because the Bitcoin market, in the agency’s view, was still too heavily manipulated back in…