New Proposed ETF Would Encompass Bitcoin Futures Alongside Sovereign Debt Instruments

Reality Shares ETF Trust — a unit of crypto-focused fintech firm Blockforce Capital — has filed a proposal for an exchange-traded-fund (ETF) that would invest in a portfolio which includes both sovereign debt instruments and Bitcoin (BTC) futures.The ETF filing was submitted to the United States Securities and Exchange Commission (SEC) Feb 11.

ETFs are securities that track a basket of assets proportionately represented in the fund’s shares. They are seen by some as a potential ‘holy grail’ that would herald the widespread adoption of cryptocurrencies as a regulated and passive investment instrument.

The proposed fund, to be listed on NYSE Arca, is designed to “provide investment exposure to global currencies, both fiat and virtual currencies, that have been widely adopted for use (e.g., as store-of-value, international remittance, foreign-exchange trading) throughout the world.”

In regard to BTC futures, the fund would initially — if successful — invest via a wholly owned Cayman Islands-registered subsidiary in the cash-settled BTC futures that are currently traded on CBOE Futures Exchange (CFE) and the Chicago Mercantile Exchange (CME).

The filing notes that CFE and CME BTC futures positions will thus be valued “at their respective futures cash settlement values as published [...] at the close of each trading day.” It also proposes that the fund may evolve to invest in BTC futures that are traded on other exchanges in the future, but emphasizes that the fund “will not invest directly in [B]itcoin.” The filing adds:

“The Fund may gain most of its exposure to Bitcoin Futures through its investment in the Subsidiary, which invests in Bitcoin Futures. To the extent the Fund invests in such instruments directly, it will seek to restrict its income from such instruments to a maximum of 10 percent of its gross income [...] to comply with certain qualifying income tests necessary for the Fund to qualify as a regulated investment company.”

In addition to Bitcoin futures, the proposed fund will also allocate larger investments to more traditional “high-quality, short-term sovereign debt instruments listed for trading on U.S. exchanges and denominated in U.S. dollar, euro, British pounds sterling, Japanese yen and Swiss francs.”

As previously reported, a separate Bitcoin-related ETF by investment firm VanEck and financial services company SolidX — for listing on CBOE’s BZX Equity Exchange — is currently making a circuitous route through various filings with the SEC.

With multiple actors — including the Winklevoss twins — either failing or continuing to await the SEC’s approval of their BTC-related ETFs, crypto entrepreneur and CNBC analyst Brian Kelly has recently claimed there is “no shot” for a crypto ETF to get the regulatory greenlight in 2019.