VanEck is due to list a low-cost bitcoin futures exchange-traded fund in the US after the Securities and Exchange Commission rejected the issuer’s application for a spot bitcoin ETF.
The rejection came despite the SEC approving ETFs in bitcoin futures contracts listed on CME Group in October.
VanEck said in a statement that it is due to launch the VanEck Bitcoin Strategy ETF, an actively managed ETF that invests in standardized cash-settled bitcoin futures, on 16 September.
“XBTF comes to market as the lowest-cost bitcoin-linked ETF, with a net expense ratio 30 basis points (bps) lower than its next closest competitor,” added VanEck.
The net expense ratio is 0.65%.
The ETF will invest primarily in bitcoin futures listed and traded on the CME Group. VanEck said average daily open interest in the CME’s bitcoin futures has increased from $77m in the first quarter of 2018 to approximately $1.5bn in the third quarter of this year.
Kyle DaCruz, director, digital assets product with VanEck, said in a statement: “While a ‘physically backed’ bitcoin ETF remains a key goal, we are very pleased to be providing investors with this important tool as they build their digital asset portfolios.”
State Street will provide services including ETF basket operations, custody of the ETF shares, fund accounting, order-taking and act as the transfer agent.
Nadine Chakar, head of State Street Digital, said in a statement: “Our newly launched division, State Street Digital, was created to help drive innovation and address the industry’s evolving shift to digital finance, and we continue to prioritize developing our servicing capabilities as part of our broader strategy for the crypto and digital assets environment. We are pleased to further develop our longstanding partnership with VanEck on this important fund launch.”
The introduction of the VanEck Bitcoin Strategy ETF follows the ProShares Bitcoin Strategy ETF listing on the NYSE on 19 October, and Valkyrie Funds launching its Bitcoin Strategy ETF on Nasdaq on October 22.
Giang Bui, head of US exchange-traded products at Nasdaq, said in a blog that Valkyrie Investments’s bitcoin futures ETF was a milestone in terms of product innovation.
“Kudos to all issuers for developing exciting new ETFs and navigating the regulatory process so investors can diversify their portfolios and save for the future,” Bui added.
She continued that issuers have submitted a number of ETF filings to the SEC, including physically-backed bitcoin and ether products as well as cryptocurrency futures-based products, and the pace has picked up this year.
For example, Victory Capital has filed for a multi-coin ETF tracking the Nasdaq Crypto Index (NCI), Nasdaq’s first digital asset index which launched in February this year. The key components of the NCI include bitcoin, ether, litecoin, chainlink, bitcoin cash, uniswap, stellar lumens and filecoin.
Bui noted that Europe, Dubai and Canada have already launched cryptocurrency ETFs in their markets.
On 1 June VanEck became the first issuer to list its crypto ETPs on the Amsterdam and Paris stock exchanges after they started trading on Deutsche Börse Xetra in Germany last year.
Spot bitcoin ETFs
The SEC said in an order on 12 November that it disapproved of VanEck’s bitcoin spot ETF because Cboe Global Markets, the proposed listing venue, has not demonstrated that it has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets.
The regulator said in the order: “The hallmarks of a surveillance-sharing agreement are that the agreement provides for the sharing of information about market trading activity, clearing activity, and customer identity; that the parties to the agreement have reasonable ability to obtain access to and produce requested information; and that no existing rules, laws, or practices would impede one party to the agreement from obtaining this information from, or producing it to, the other party.”
Joe Saluzzi, partner at institutional agency broker Themis Trading, was unsurprised at the rejection. He said:
Jan van Eck, chief executive of VanEck, expressed his disappointment:
The Blockchain Association was also disappointed:
Patrick Heusser, head of trading at Switzerland-based Crypto Finance (Brokerage), said in a blog: “My personal take is this: strong lobbying forces are flexing their muscles.”
Heusser added. “If the SEC at some point approves a spot Bitcoin ETF, all those naysayers will need to backpedal hard and start trying to explain to their clients why they were unable to participate in one of the largest wealth accumulation assets.”