Recent Developments in the North American (ETF) Space

There is a growing queue of crypto-asset exchange-traded fund (ETF) applications at the U.S. Securities and Exchange Commission (SEC). So far, the SEC hasn’t been friendly towards the concept, pointing to inadequate means to prevent market manipulation and illicit activities at the top exchanges, as it rejected Bitcoin (BTC) ETF applications starting in 2018.

With institutional and retail crypto-asset investment interest surging, three firms (Valkyrie Digital Assets, Vaneck, New York Digital Investment Group) have recently submitted BTC-based ETF filings with the SEC. However, the approval process will be a long slog, with late September being a best guess as to when it will be complete, if successful. Hopes are high this time around because of the new Presidential Administration and the possibility of longtime crypto advocate Gary Gensler as SEC chair.

Meanwhile, the Ontario Securities Commission (OSC) cleared the launch of the Purpose Bitcoin ETF, making it the first publicly-traded ETF to gain regulatory approval in North America. After about a week of trading on the Toronto Stock Exchange it had bought 10,064 Bitcoin (about $450 million at a BTC price of $45,000). Soon after, the OSC  approved the Evolve Bitcoin ETF but it appears to be off to a slower start. Also, CI Global Asset Manager filed a preliminary prospectus for its CI Galaxy Bitcoin ETF.

Alternatively, there is the Grayscale Bitcoin Trust and other similar closed-end trust products coming down the pipeline. Osprey Fund’s Bitcoin Trust is now available on a private-placement basis to retail investors. Bitwise Asset Management is seeking Financial Industry Regulatory Authority approval to trade shares of its Bitwise Bitcoin Fund on New York-based OTCQX over-the-counter (OTC) marketplace. BlockFi registered its new Bitcoin Trust with the SEC late last month. Bitwise launched a DeFi Crypto Index Fund that will track companies and securities involved in decentralized finance (DeFi).

Also, tech company MicroStrategy has been selling zero-coupon convertible senior notes with the intention to use the net proceeds to buy BTC. In December 2020 they sold $650 million of notes, and then another $1,050 million in February. However, a Gartner Finance poll of finance managers found that a majority of them are not planning to hold BTC as a corporate asset. In their responses, most of the 77 finance leaders interviewed cited BTC’s volatility as “extremely difficult to mitigate.”

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