Valkyrie Investments has joined ProFunds, Invesco, and VanEck in the race to the first Bitcoin futures ETF after filing an application with the SEC on Wednesday.
Valkyrie was one of the first issuers to file with the SEC for a Bitcoin ETF this year, but the SEC has continued to stall decision-making, forcing issuers to get creative.
The Valkyrie Bitcoin Strategy ETF seeks to purchase enough Bitcoin futures contracts that the notional value of the Bitcoin within the contracts held by the fund are as close to 100% of the fund’s net assets as possible.
This distinguishes Valkyrie from the other proposed funds, all of which plan on investing in other investment vehicles and products that provide exposure to Bitcoin, such as private trusts.
The fund will invest any remaining assets in “collateral investments” defined as U.S. Government securities such as bills and bonds, money market funds, and corporate debt securities.
Corporate debt securities must be issued by a business with a time of purchase rating in one of the four highest categories of a nationally recognized statistical rating organization like S&P Global Ratings. The collateral investments are designed to provide liquidity.
The fund will invest indirectly via a wholly owned Cayman Islands subsidiary that will have the same investment objective, advisor, and sub-advisor. The fund will invest no more than 25% of its total assets each year.
The application lists Steven McClurg, Rafael Zayas, and Ryan Dofflemeyer as the fund’s portfolio managers.
The fund is classified as non-diversified and therefore not required to meet diversification requirements under the Investment Company Act of 1940.
The fund will not invest directly in Bitcoin. No management fee or ticker was listed.
Bitcoin Futures ETFs Take Center Stage
Futures-based ETFs have stepped into the limelight this month after SEC Chair Gary Gensler signaled his support for Bitcoin-futures-based ETFs at the Aspen Security Forum on August 3rd.
According to Gensler, the laws under which ETFs operate provide investors with significant protections, all the more important in the largely unregulated and historically volatile crypto space.
Gensler said in his remarks that large parts of the crypto space are operating outside of regulatory frameworks, going on to say that this position is likely unsustainable.
“For those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of our public policy frameworks,” Gensler said.
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