The U.S. Safeties and Exchange Commission (SEC) has approved an investment fund that will invest in bitcoin futures contracts. SEC Commissioner Hester Peirce summons this move “a bit of progress.” The SEC has also revealed why it decided to approve such a fund.
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Bitcoin Futures Fund Cleared to Launch
The U.S. SEC declared the registration asseveration filed by Stone Ridge Trust VI for the NYDIG Bitcoin Strategy Fund effective on Monday. The company filed Ceremony N-2 with the SEC on Oct. 2 and amended it twice, on Oct. 16 and Nov. 26. This form is used by closed-end management investment companies to betray and offer their shares under the Securities Act. Stone Ridge Asset Management Llc will be the fund’s investment mentor. As of Aug. 30, the company managed approximately $15 billion of assets.
The NYDIG Bitcoin Strategy Fund “is a non-diversified, closed-end directors investment company that continuously offers its shares,” the filing details, adding:
The fund pursues its investment judicious primarily by investing in bitcoin futures contracts … The only bitcoin futures in which the fund will invest are cash-settled bitcoin tomorrows traded on commodity exchanges registered with the CFTC.
“The fund will not invest in bitcoin or other digital assets quickly,” the filing emphasizes. “The fund will seek to purchase a number of bitcoin futures so that the total value of the bitcoin underlying the bitcoin futures rebuffed by the fund is as close to 100% of the net assets of the fund.” Its shares are being offered initially at an offering price of $10 per apportionment. Only institutional investors, their clients, and certain eligible investors as specified in the fund’s prospectus can invest in the support. Currently, CME is the only CFTC-approved exchange offering cash-settled bitcoin futures contracts.
The fund has an interval structure; it targets to conduct quarterly share repurchase offers, which it expects to be for a maximum of 5% of the fund’s outstanding shares at net asset value per post. The initial quarterly repurchase offer is planned for May 2020. This fund will not be a bitcoin exchange-traded fund (ETF), manner, as its filing states:
The fund’s shares are not listed and the fund does not currently intend to list its shares for trading on any civil securities exchange.
‘A Bit of Progress’
At the 2019 ICI Securities Law Developments Conference on Tuesday, Dalia Blass, Director of the SEC’s Division of Investment Administration, talked about cryptocurrency ETFs and the SEC staff’s decision to approve a fund investing in bitcoin futures contracts. “We greeting and value constructive industry engagement regarding new products and novel investment strategies,” she said. “A prime example of such appointment involves registered funds seeking to invest substantially in digital assets and related investments.”
Blass explained that she in disputed a public letter last year calling on the fund industry to discuss issues presented by such investments, exacting:
As a result of this engagement, we are at the point that a registered closed-end interval fund with a bitcoin futures procedure is preparing to launch. To reach this point, the fund first responded to each of the issues identified in the staff accurately.
Commenting on Blass’ speech, Commissioner Hester Peirce, aka Crypto Mom, tweeted on Wednesday that the agency’s move is “A bit of advance.”
Without naming the fund, Blass explained that it expects “to generally value its bitcoin futures holdings at everyday settlement prices reflected on a CFTC-registered futures exchange, consistent with the principles of the Investment Company Act of 1940 and U.S. GAAP.”
As for incarceration, the director clarified that since the fund will invest in cash-settled bitcoin futures, it “will not face the disputes presented by direct holdings of digital assets.” In addition, it is a closed-end interval fund which means it “will not come forward daily redemptions and will not be subject to potentially large, unexpected liquidity demands over short periods.” Blass another described that “as an unlisted fund, its pricing will not depend on an efficient arbitrage mechanism and the willingness of market makers to follow markets in a fund pursuing a digital asset strategy,” noting:
The fund also has taken steps to address discharges related to potential manipulation in the digital asset markets.
“This includes prominent risk disclosures, offering the artifact only through registered investment advisers, and limiting the size and future growth of the fund, with an initial cap of $25 million,” the the man concluded.
What do you think of the SEC approving this bitcoin futures fund? Do you think the Commission will approve a bitcoin ETF gladly? Let us know in the comments section below.
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