March 26, 2023
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ETF

SEC approves 9 more WisdomTree ‘blockchain-enabled’ funds

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After announcing the approval of nine new digital funds, WisdomTree reiterated that it wants to further integrate blockchain tech to improve the investor experience.

The U.S. Securities and Exchange Commission (SEC) has given the green light to nine more blockchain-enabled funds from $82 billion asset manager WisdomTree.

None of these funds track crypto assets themselves, but the firm does utilize the Ethereum and Stellar blockchains to keep a secondary record of share ownership, thus making them blockchain-enabled or “digital funds” as WidsomTree describes them.

The firm announced the SEC’s approval on Dec. 14, and outlined that the nine digital funds offer exposure to a host of different asset classes such as equities, commodities and floating rate treasuries. The funds are expected to launch via the WisdomTree Prime mobile app in the first quarter of 2023.

“We believe that blockchain-enabled finance has the potential to improve the investor experience through enhanced liquidity, transparency and standardization, which we aim to achieve over time,” said Will Peck, WisdomTree’s Head of Digital Assets.

The latest SEC approval comes three months after it approved the firm’s first digital fund called the WisdomTree Short-Term Treasury Digital Fund (WTSYX) in September.

In a Sept. 26 blog post, Peck emphasized that WisdomTree is looking at creating a greater investor experience via digital funds and blockchain tech, particularly in relation to trading and transaction settlements.

“To give a few examples […] it’s remarkable that some blockchains can provide near-instant settlement finality on a peer-to-peer basis on a 24/7/365 basis. Blockchains can allow for atomic settlement (where software ensures assets are exchanged in settlement) as opposed to other potentially riskier settlement processes, like delivery vs. payment (DvP),” he wrote.

As of Dec. 14, WisdomTree claims to have roughly $82 billion worth of assets under management across its U.S. and Europe listed funds.

Related: SEC looks to intercept Grayscale Bitcoin ETF review bid

Like Grayscale Investments, the firm has also been pushing to launch an exchange traded fund (ETF) offering exposure to the spot price of Bitcoin (BTC) since early 2021.

However the SEC has rejected WidsomTree’s applications on multiple occasions, citing general concerns over fraud and market manipulation on BTC trading markets.

To date, the SEC is still yet to approve a spot BTC ETF.

The firm however offers various products tracking the altcoin market and earlier this year in March, the firm also launched three crypto exchange-traded products (ETPs) backed by Solana (SOL), Cardano (ADA) and Polkadot (DOT).

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Hong kong

Hong Kong financial regulator issues guidelines for crypto futures ETFs

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The Securities and Futures Commission hinted it would follow in the CME’s footsteps by only initially allowing listings of ETFs linked to Bitcoin and Ether futures.

The Securities and Futures Commission of Hong Kong has set up requirements for entities considering a public offering of an exchange-traded fund (ETF) tied to cryptocurrency futures.

In an Oct. 31 circular, the SFC said that in addition to previously imposed requirements on unit trusts and mutual funds for authorization of a crypto futures ETF, management companies in Hong Kong would need to “have a good track record of regulatory compliance” as well as three years of experience managing ETFs, with consideration for similar investment vehicles. The financial regulator hinted it would follow in the Chicago Mercantile Exchange’s footsteps by only initially allowing listings of ETFs linked to Bitcoin (BTC) and Ether (ETH) futures.

“Only [virtual asset, or VA,] futures traded on conventional regulated futures exchanges are allowed, subject to the management company demonstrating that the relevant VA futures have adequate liquidity for the operation of the VA Futures ETF and the roll costs of the relevant VA futures contracts are manageable and how such roll costs will be managed,” said the SFC.

The financial regulator added that the net derivative exposure of any crypto futures ETF “shall not exceed 100% of the ETF’s total net asset value,” and companies should expect to adopt an active investment strategy to account for incidents including market disruptions. The SFC also said ETF issuers were to “carry out extensive investor education” before the launch of any crypto investment vehicle in Hong Kong.

The SFC circular came as part of a policy update from Hong Kong’s government, which announced on Oct. 31 that it was “ready to engage” with global crypto exchanges on regulatory issues. The government said it planned to launch a number of pilot projects, including those aimed at nonfungible tokens, green bond tokenization, and a digital Hong Kong dollar.

Christopher Hui, Hong Kong’s secretary for financial services and the reasury, said:

“We recognise the potential of DLT and Web 3.0 to become the future of finance and commerce, and under proper regulation they are expected to enhance efficiency and transparency. The Government is prepared to embrace this future, and we welcome the clustering of Fintech and VA community and talents in Hong Kong, and we will promote the sustainable development of financial services across the whole VA value chain.”

Related: Not like China: Hong Kong reportedly wants to legalize crypto trading

Hong Kong’s policy aims would seemingly put it on a different path than China, despite the political lines between the special administrative region and bordering nation becoming more blurred in recent years. The Chinese government has cracked down on crypto firms operating in the country but continues to move forward with piloting its central bank digital currency, the digital yuan.

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It’s happened: Someone’s filed for Cramer ETFs with the SEC

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Tuttle Capital Management hopes for a short ETF named Inverse Cramer ETF (SJIM), and a long ETF called Long Cramer ETF (LJIM).

Connecticut-based advisory firm Tuttle Capital Management has submitted a preliminary prospectus filing with the United States Securities and Exchange Commission (SEC) for two new exchange-traded funds (ETFs) centered around betting against the investment tips from Jim Cramer.

Cramer is the host of CNBC’s Mad Money and has become a popular meme in the crypto and stock community, who believe he has an uncanny knack for giving investment tips that end up being way off the mark.

In relation to crypto, one of Cramer’s most notable tips was to buy Coinbase stock when it was “cheap” at $248 in August last year. Since then, COIN has continued to collapse and sits at $72.97 at the time of writing.

According to the Oct. 5 preliminary prospectus SEC filing, if approved, Tuttle Capital Management would launch a short ETF named Inverse Cramer ETF (SJIM) and a long ETF called Long Cramer ETF (LJIM).

The company notes in the filing that the investment objective is to provide investment results “that are approximately the opposite of, before fees and expenses, the results of the investments recommended by television personality Jim Cramer.”

To select the weighting of each ETF, Tuttle Capital Management will essentially take the opposite position of whatever Cramer publicly picks on CNBC or Twitter. However it will be purely stock-based and not crypto assets.

“Under normal circumstances, at least 80% of the Fund’s investments is invested in the inverse of securities mentioned by Cramer,” the filing reads.

Despite the apparent novelty and absurdity of the filing, Bloomberg’s senior ETF analyst Eric Balchunas was unsurprised by the move, highlighting on Twitter that he had tipped such a thing to occur back in February:

“We actually wrote back in Feb about how an Inverse Cramer ETF would likely be filed at some point. Given some of the stuff that has been tried with ETFs this isn’t [a] big stretch. And ETFs tied to big personalities not unprecedented e.g. $SARK $TSLQ.”

Individual traders have already tried a similar method, with Cointelegraph reporting in August that Twitter-famous crypto trader AIgod had doubled his “Inverse Cramer” portfolio in a month to more than $100,000 purely through trading against Cramer’s tips.

Tuttle Capital’s unique ETFs

This type of play is nothing new for Tuttle Capital Management. The firm previously caused a stir late last year by launching an inverse ETF on the Nasdaq stock exchange called the Turtle Capital Short Innovation ETF (SARK).

Related: The bottom is in: CNBC’s Jim Cramer says crypto has ‘no real value’

In what Tuttle Capital CEO Matt Tuttle described in November as something that has “has never been done before,” the purpose of SARK is to bet against the ARK Innovation ETF (ARKK) from Cathie Wood’s ARK Invest.

“So if ARKK is down a percent, we’ll be up somewhere around a percent, and if [ARKK] is up a percent, we’ll be down somewhere around a percent,” he said.

Notably, since its launch on Nov. 9, SARK is up 83.1%, according to Yahoo Finance data, which may be unsurprising considering the bearish investing climate in 2022.

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SEC extends window to decide on ARK 21Shares spot Bitcoin ETF to August

SEC extends window to decide on ARK 21Shares spot Bitcoin ETF to August

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J. Matthew DeLesDernier, assistant secretary for the SEC, said it had extended to allow for “sufficient time to consider the proposed rule change and the issues raised therein.”

The United States Securities and Exchange Commission has pushed the deadline to approve or disapprove ARK 21Shares’ Bitcoin exchange-traded fund to August 30.

According to a Tuesday filing from the SEC, the regulatory body extended the deadline for approving or disapproving the ARK 21Shares spot Bitcoin (BTC) ETF from July 16 for an additional 45 days, to August 30. The application, originally filed with the SEC in May and published for comment in the Federal Register on June 1, included a proposed rule change from the Chicago Board Options Exchange BZX Exchange.

Ark Invest partnered with Europe-based ETF issuer 21Shares to file for a spot Bitcoin ETF listed on CBOE BZX Exchange in 2021, but the SEC rejected its application in April. Under current rules, the regulatory body is able to delay its decision and open the investment offering to public comment for up to 180 days, suggesting that the SEC could provide a final answer by January 2023.

In the notice of designation of a longer period, SEC Assistant Secretary J. Matthew DeLesDernier said it had chosen an extension to allow for “sufficient time to consider the proposed rule change and the issues raised therein.” The SEC has never approved an ETF with direct exposure to crypto but gave the green light to investment vehicles linked to BTC futures, including funds from Valkyrie and ProShares.

Related: Grayscale legal officer says Bitcoin ETF litigation could take two years

In June, when the SEC denied Grayscale’s application to convert its Grayscale Bitcoin Trust (GBTC) into a spot BTC ETF, the investment manager filed a petition for courts to review the regulatory body’s decision. Grayscale senior legal strategist Donald Verrilli alleged in the filing that the SEC had acted “arbitrarily and capriciously” by “failing to apply consistent treatment to similar investment vehicles.”

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WSJ editorial slams SEC's 'bewildering' Bitcoin ETF denials

WSJ editorial slams SEC’s ‘bewildering’ Bitcoin ETF denials

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The editorial board has drawn attention to a two-pronged approach employed by SEC’s Gensler which makes it practically impossible to get a spot Bitcoin product approved.

The Wall Street Journal Editorial Board has come out swinging against Gary Gensler’s “legendary” resistance to approving a spot Bitcoin exchange-traded fund (ETF). 

The hard-hitting opinion piece, published on Wednesday, July 6 called out the Gensler-led Securities and Exchange Commission (SEC) for overt inconsistencies in how the commission handles applications for Bitcoin-related exchange-traded products (ETPs) compared to more traditional assets and other commodities.

So far, Gensler’s SEC has rejected every proposal for a spot Bitcoin ETP, including two in the last week from Grayscale and Bitwise, which resulted in Grayscale launching legal action against the SEC.

These consistent rejections led SEC Commissioner Hester Peirce to declare Gensler’s resistance to spot crypto ETPs as “becoming legendary”, as the commission has already approved several ETPs for Bitcoin futures, which come at much higher costs and include much greater risk for investors than the proposed spot ETPs.

Peirce also questioned why ETPs haven’t been approved in the United States despite the products having done so elsewhere.

“At what point, if any, does the increasing maturity of the Bitcoin spot markets and the success of similar products elsewhere tip the scale in favor of approval?”

The editorial board has also drawn attention to a two-pronged approach employed by Gensler which makes it practically impossible to get a spot Bitcoin product approved.

This includes requiring ETP sponsors to demonstrate that a significant amount of Bitcoin trading occurs on a regulated market, or that the underlying market must “possess a unique resistance to manipulation beyond the protections…of traditional markets.”

According to the WSJ, Gensler is “fully aware” that the first criteria simply cannot be met because almost all Bitcoin trading currently occurs on unregulated crypto exchanges.

The second criterion is also extremely difficult for sponsors to meet as the SEC has “arbitrarily established” a higher standard for spot Bitcoin ETPs without “explaining how to satisfy it.”

Related: The US Dept. of Commerce has 17 questions to help develop a crypto framework

Eric Balchunas, a senior ETF analyst at Bloomberg told his 107,000 Twitter followers that it was “nice to see” the WSJ echo similar thoughts to his ETF analyst colleague James Seyffart — claiming that Gensler is “holding innovation hostage” to take control of the crypto market.

The piece comes one week after Grayscale launched legal action against the SEC for denying its application to launch a spot Bitcoin ETF — claiming that the SEC’s inconsistent rules concerning spot and futures Bitcoin ETPs contradict the law’s requirement that regulators apply “consistent treatment to similar investment vehicles.”

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