Invesco, an independent investment management company, has filed with the Securities and Exchange Commission (SEC) for a Bitcoin (BTCUSD) exchange traded fund (ETF) that will invest in Bitcoin futures and cryptocurrency exchange traded products (ETPs).
The Atlanta-based company, which filed its application on Aug. 5, is the latest investment firm in a growing list to clamor for an ETF that will enable greater liquidity in the cryptocurrency ecosystem. There are more than a dozen firms in that list, and Invesco, which has more than $1.5 trillion worth of assets under management, is among the largest. Given recent precedence, Invesco might also become among the first firms to gain approval for a Bitcoin ETF.
Key Takeaways
- Independent investment management firm Invesco filed for a Bitcoin ETF last week.
- The fund will not invest directly in the cryptocurrency and will put money in CME Bitcoin futures contracts and crypto ETP products
- The filing toes the regulatory line drawn by the SEC Chair earlier, when he said that he is “looking forward” to reviewing filings based on CME-traded Bitcoin futures contracts.
- More than a dozen Bitcoin ETF applications have been filed with the SEC since last year and are pending a decision.
A Fund That Does Not Invest Directly in Bitcoin
Per Invesco’s filing, the Bitcoin Strategy fund will not directly invest in the cryptocurrency. Instead, it plans to invest in bitcoin futures contracts traded at the Chicago Mercantile Exchange (CME) and in crypto ETPs like the Grayscale Bitcoin Trust (GBTC). It will also put money into a host of traditional financial instruments, such as government securities and money market funds, for a “temporary defensive position” against the volatility of crypto markets.
Invesco’s investment strategy is notable because it comes on the heels of recent comments made by SEC Chair Gary Gensler about the possible approval of a Bitcoin ETF. During his remarks at the Aspen Security Summit last month, Gensler said investment vehicles that provide exposure to crypto assets already exist in the markets and name-checked GBTC and mutual funds that invest in Bitcoin futures at CME.
“I anticipate that there will be filings with regard to exchange traded funds under the [1940] Investment Company Act. When combined with the other federal securities laws, the ’40 Act provides significant investor protections. 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,” the SEC Chair said.
Gensler, who taught a course on blockchain and cryptocurrencies at the Massachusetts Institute of Technology (MIT) before becoming a commissioner, has argued for bringing cryptocurrency exchanges and products under government regulation. He is a fierce critic of the current state of affairs in the crypto ecosystem. At the security forum, he said that cryptocurrencies in their current form were an asset class that was “rife with fraud, scams, and abuse in certain applications.”
Both investments that Invesco mentioned in its filings report to government agencies. While CME falls under the jurisdiction of the Commodities Futures Trading Commission (CFTC), the Grayscale Bitcoin Trust is an SEC-reporting entity and plans to convert itself into an ETF in the future.
A Possible Bitcoin ETF Approval?
To be sure, Invesco is not the only Bitcoin ETF application that aims to invest only in regulated derivative products such as Bitcoin futures contracts. Another investment firm VanEck filed for an ETF based on Bitcoin futures contracts back in 2017. It has resubmitted the application with “minor amendments,” according to a recent report.
However, Invesco’s filing has generated excitement in the crypto community because it hews closely to Gensler’s recent directive. There is also precedence in the recent past suggesting that the SEC might look at the filing favorably.
The Bitcoin Strategy ProFund (BTCFX) mutual fund, which also invests in the cryptocurrency’s futures contracts traded at the CME, received approval from the agency earlier this year. “The advantage of this approach is clear. The futures market is regulated. So, you’ve got the CME [Chicago Mercantile Exchange], the CFTC [Commodity Futures Trading Commission], you’ve got the clearinghouse, and then you’re in a mutual fund that people understand well and you can get in and out every day at NAV,” ProShares head of investment strategy Simeon Hyman told CNBC.
The head of investment strategy at Grayscale, a firm whose products have benefitted from Gensler’s insistence on regulation, told the same channel that the SEC Chair’s comments at Aspen were “very positive.” According to Grayscale’s David LaValle, “the story is no longer if there’s going to be bitcoin ETF but when there’s going to be a bitcoin ETF.”
