Invesco Ltd., one of the largest exchange-traded fund operators in the United States, plans to deploy a range of funds backed by bitcoin and other cryptocurrencies.
The Atlanta-based asset manager plans to announce on Wednesday that it is joining Galaxy Digital Holdings Ltd., a fledgling digital asset firm, to develop U.S.-listed ETFs that hold and track bitcoin’s performance. and other cryptocurrencies, while trading like a stock. .
In doing so, the company aims to position itself to capitalize on the fervor around digital assets if and when the Securities and Exchange Commission approves trading in such products. So far, however, the SEC has not.
Among the first funds planned under the partnership is an ETF holding bitcoin that was initially offered by Galaxy last spring. After the market closed on Tuesday, the ETF’s filing with the SEC was revised to make Invesco the fund sponsor.
“It’s not just about bringing the first bitcoin ETF to market,” said John Hoffman, head of the Americas, ETFs and Indexed Strategies at Invesco, of the partnership. “It’s about broadening the horizon. We ultimately think we can define this new market.”
The biggest obstacle to a US-listed bitcoin ETF and other cryptocurrency funds is the SEC, which has rejected or delayed decisions on many crypto proposals over the past eight years. The regulator is concerned that the funds may be susceptible to fraud and manipulation if it cannot monitor transactions in the underlying assets. SEC Chairman Gary Gensler reiterated these concerns last week in testimony before the Senate Banking Committee. He compared crypto trading to the “old world of ‘buyer beware'” that existed before securities laws were passed.
In August, Gensler indicated that he would be more receptive to ETFs that will trade bitcoin futures rather than the cryptocurrency itself. Indeed, the regulator exercises greater supervision over the main derivatives exchanges such as those managed by CME Group.
Invesco was among the asset managers to jump on Mr. Gensler’s opening. In the same month, the $ 471 billion ETF operator filed plans to launch an ETF that will invest in bitcoin futures, as well as exchange-traded products and investment trusts holding bitcoin. .
Invesco also filed plans in June for two cryptocurrency-focused, equity-focused ETFs that deal with digital assets and technology, the Invesco Galaxy Blockchain Economy ETF and the Invesco Galaxy Crypto Economy ETF. Both will also hold positions in trusts and funds that hold cryptocurrencies.
“There are a multitude of ways to package these exhibits. It’s no different from other asset classes, ”said Hoffman, comparing the rollout to how he developed a line of energy-themed funds. “We started with stocks, investing in companies involved in the exploration and production of energy. in futures contracts and continued to add other means of obtaining these various exposures. “
Mr Hoffman said Invesco has tapped Galaxy as a partner to quickly gain deeper expertise in cryptocurrencies and blockchain technology, as well as to help deliver educational content to investors. Founded in 2018 by former hedge fund manager Mike Novogratz, Galaxy provides asset management, trading, investment banking and other services, all with a focus on digital assets, cryptocurrencies and blockchain. As of August, Galaxy managed just over $ 2 billion in assets, said Steve Kurz, the company’s head of asset management.
A variety of exchange-traded crypto products are already operational in Europe and Canada. Simon Mott, director of marketing at Trackinsight, said the products hold around $ 9.25 billion, most of which resides in Europe. Mr Mott said the products have proven popular with institutions looking to gain easy exposure to crypto assets, as well as some retail and non-professional investors.
One of the largest crypto fund operators, Swiss company 21Shares AG, manages a variety of strategies, including exchange-traded products focused on bitcoin, binance coin, ethereum and ripple, between others, giving an overview of Invesco’s possible lineup of physical cryptos. the funds might look like. But U.S. crypto funds are likely to be relatively expensive, with several European offerings charging fees of up to 2.5% per year, more than double the average spend of all open-end mutual funds.
“The market would probably be 15 times bigger” for crypto assets in the United States, Mott said.
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