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Schwab Dips Toe Into Crypto ETF Market

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What You Need to Know

  • A prospectus for the Schwab Crypto Economy ETF was filed with the SEC on Wednesday.
  • The ETF will seek investments in companies standing to benefit from crypto investments and crypto-related tech.
  • CEO Walt Bettinger has said there are complications to resolve before firms like Schwab can offer direct crypto investments.

Charles Schwab plans to enter the cryptocurrency exchange-traded fund sector, according to a prospectus filed with the Securities and Exchange Commission on Wednesday by its Schwab Strategic Trust.

But it looks like the firm is taking a cautious approach. The planned Schwab Crypto Economy ETF will not invest directly in any cryptocurrencies. It will instead seek investments in companies that stand to benefit from crypto investments and crypto-related technology, the prospectus says.

Schwab did not immediately respond to a request for comment on Friday.

“The fund’s goal is to track as closely as possible, before fees and expenses, the total return of an index that is designed to deliver global exposure to companies that may benefit from the development or utilization of cryptocurrencies (including bitcoin) and other digital assets, and the business activities connected to blockchain and other distributed ledger technology,” according to the prospectus.

Schwab Asset Management will serve as the investment advisor for the ETF. Its portfolio managers will be Christopher Bliss, chartered financial analyst, managing director and head of Passive Equity Strategies; Chuck Craig, CFA and senior portfolio manager; and David Rios, portfolio manager.

​The ETF will be reconstituted and rebalanced quarterly on the third Friday of each March, June, September and December, or on the previous trading day if that day is a U.S. exchange holiday, according to the prospectus.

Schwab is looking to list the fund on NYSE Arca, according to the prospectus. The company did not specify what the ETF’s expense ratio or ticker symbol will be, nor did it say when it expects to start listing the ETF.

Schwab’s Crypto Concerns

Cryptocurrency is “certainly hard to ignore,” but Charles Schwab CEO Walt Bettinger remained cautious about offering direct trading of Bitcoin and other cryptocurrencies until lingering issues were resolved, he said in November at the Securities Industry and Financial Markets Association’s annual conference.

Crypto has “become large enough and consumer awareness is high enough that you can’t ignore it,” Bettinger said at the time. But “from a corporate standpoint, we don’t really take a viewpoint on whether it’s right for investors. …. Personally, I really have no opinion on Bitcoin as an investment any more than I do artwork or the explosion in values of baseball cards of late.”

He predicted there would be “more and more ways to invest in crypto — maybe ways that are a bit safer than direct purchases.”

For now, however, “when you look at it from a regulatory standpoint, it seems pretty clear that there’s a certain group of organizations that are not headed toward direct trading at this point and, generally speaking, they’re under a common regulator with the Federal Reserve,” he said.

On the other hand, “some of the organizations that are under a different regulatory regime seem to be stepping out a bit more on the direct trading side,” he noted.

When it comes to the “complications around cryptocurrency, I think we look at it more from a bigger-picture standpoint,” he went on to say.

For one thing, he explained, it is still not clear exactly how the U.S. government intends to regulate crypto. That is concerning, “particularly given the anonymity that is possible through crypto investing and the conversion of cash to stablecoins in an offshore, less-than-transparent manner” that can be used to “trade anonymously within” digital wallets, he said.

(Image: Shutterstock)