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Portfolio > Alternative Investments > Cryptocurrencies

How Invesco, Others are Circumventing SEC's Crypto ETF Reluctance

By Bernice Napach

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What You Need to Know

  • Invesco has filed applications with the SEC for two ETFs that indirectly invest in cryptocurrencies.
  • Bitwise Asset Management and Simplify Asset Management already trade crypto-linked ETFs.
  • On June 17, the SEC will once again decide what to do with VanEck Bitcoin Trust ETF application.

Invesco has joined a small, but growing number of firms sponsoring ETFs which invest indirectly in cryptocurrencies and are therefore more likely to receive approval by the Securities and Exchange Commission than ETFs that invest directly in Bitcoin or their cryptocurrencies.

To date, the SEC has not approved any of the dozen or so Bitcoin ETF applications that it has received and has rejected several.

Invesco has filed an application with the SEC to trade the The Invesco Galaxy Crypto Economy ETF  and the Invesco Galaxy Blockchain Economy ETF.

Both ETFs will generally invest at least 80% of assets in the assets that comprise the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Index, which includes stocks of companies “materially engaged” in cryptocurrencies, cryptocurrency mining or buying, and enabling technologies, plus cryptocurrency futures, exchange-trade products and private investment trusts like the Grayscale Bitcoin Trust that are linked to cryptocurrencies and trade over the counter.

The Invesco filings follow the approval and trading of two ETFs that also invest indirectly in crypto: the Bitwise Crypto Innovators ETF (BITQ), which invests in companies involved in the cryptocurrency ecosystem, and the Simplify U.S. Equity PLUS GBTC ETF (SPBC), which invests 10% to 15% of its assets in the Grayscale Bitcoin Trust and the remainder in U.S. equities.

David Nadig, chief investment officer and director of research of ETF Trends and ETF Database, said the indirect cryptocurrency ETFs are “literally the only route available to [asset managers.]  There’s clearly investor demand for an on-exchange, securitized way of accessing crypto — whether it’s advisors or just folks looking to use their 401(k) brokerage window.  The much bigger question is whether all these assets will just instantly accrue to Bitcoin ETFs if or when approved.”

The next indication of whether the SEC will approve a cryptocurrency ETF  comes next week, on June 17, when the commission will once again consider the application of the VanEck Bitcoin Trust. The agency had postponed a decision in late April and could postpone it again. Its new chairman, Gary Gensler, has said repeatedly that Bitcoin is a speculative asset that requires  more comprehensive federal oversight than what currently exists in order to protect investors  and the integrity of the financial system.

Bernice Napach

@Think_Napach

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