Guide: Another firm has filed an ETF application with the U.S. Securities and Exchange Commission (SEC), this time Reality Shares ETF Trust, which filed on February 11, 2019, for an ETF that would include bitcoin futures and sovereign debt instruments.
Bitcoin and Bonds: A Tale of Two Markets
With the SEC’s deadline to rule on the long-hounded ETF approaches, another firm has thrown its hat in the ring, this time Reality Shares ETF Trust, which filed for an ETF on February 11, 2019. Reality Shares ETF Trust, which is a subsidiary of Blockforce Capital, is proposing that its ETF hold both sovereign debt instruments and bitcoin futures. The ETF, if approved, would be listed on the NYSC Accra and is designed to: “provide investment exposure to global currencies, both fiat and virtual, that are widely used for uses (e.g., as a store of value, international remittances, foreign exchange trading) around the world.”
The said investment will be made through a subsidiary registered in the Cayman Islands, and the investment will be in cash-settled BTC futures that trade on the CBOE Futures Exchange and the Chicago Mercantile Exchange, although it is mentioned that they could invest in futures on other exchanges at some point in the future. The futures will be valued at their settlement prices, which are published at the end of each trading day. However, there will be no direct investment in Bitcoin.
Risk and Reality in Competing ETF Worlds
The document states: “The Fund may obtain most of its Bitcoin futures exposure through its investment in a subsidiary that invests in Bitcoin futures. To the extent the Fund invests in such instruments directly, it will seek to limit its income from such instruments to a maximum of 10 percent of its gross income to meet certain income qualification tests required for the Fund to qualify as a regulated investment company.
“In addition to bitcoin futures, the ETF will also focus on sovereign debt instruments. The instruments were described in the filing as “high-quality short-term sovereign debt instruments listed for trading on US exchanges and denominated in US dollars, euros, British pounds sterling, Japanese yen, and Swiss francs.”
While the path to ETF approval has found another candidate, there are still firms like VanEck that are waiting for a decision.
