Last week, Securities and Exchange Commission chairman Gary Gensler appeared to express particular interest in exchange-traded products tied to bitcoin futures.
In the wake of that speech, several companies have moved to submit proposals for just such products, with asset manager Valkyrie becoming the latest to do so on Wednesday.
According to a draft prospectus dated August 11 and submitted to the SEC, "[t]he Fund will not directly invest in bitcoin. Under normal circumstances, the Fund will seek to purchase a number of bitcoin futures contracts so that the total notional value of the bitcoin underlying the futures contracts held by the Fund is as close to 100% of the net assets of the Fund as possible."
As the filing goes on to note:
"The Fund will invest indirectly, via a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”), in standardized, cash-settled futures contracts on bitcoin. Such futures contracts are traded on commodity exchanges registered with the Commodity Futures Trading Commission (the “CFTC”). Currently, bitcoin futures contracts in which the Fund will invest are only traded on, or subject to the rules of, the Chicago Mercantile Exchange (the “CME”). The value of bitcoin futures is determined by reference to the CME CF Bitcoin Reference Rate, which provides an indication of the price of bitcoin across certain cash bitcoin exchanges. The Fund seeks to invest in cash-settled bitcoin futures."
Valkyrie submitted its spot bitcoin ETF prospectus in April, but like its peers, the SEC has held off on definitively affirming or rejecting the current batch of proposals. Valkyrie raised $10 million in a June funding round, as previously reported.
ProShares, Invesco and, as of Tuesday, VanEck, have submitted filings for bitcoin futures-tied ETFs to the SEC since Gensler's speech. VanEck first attempted to do so 2017, though that effort was ultimately unsuccessful.
"I anticipate that there will be filings with regard to exchange-traded funds (ETFs) under the Investment Company Act (’40 Act). When combined with the other federal securities laws, the ’40 Act provides significant investor protections," he said August 3, adding:
"Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures."