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Blockchain ETFs are not far away...

Updated: Aug 14, 2021

With the addition of Coinbase (NYSE:COIN) to the world of equities, it seems blockchain related investing is going from strength to strength.

Upon closing at $328.28 a share, this gave a market cap of over USD $85 billion for the crypto exchange and a lot of attention gained for the future of the bitcoin, blockchain and distributed ledger technology. For context, that would put it in the top 100 of the S&P 500 companies by marekt cap, and bigger than General Motors, Gilead Sciences and others.

So how far away are we from seeing a blockchain ETF? Well, it’s still awaiting approval from the SEC (Securities and Exchange Commission) in the US but the ETF Issuer, WisdomTree was able to list their bitcoin related exchange traded product, WBIT (WisdomTree Bitcoin ETP) on the Toronto Stock Exchange.

More recently, Van Eck filled in their 19b-4 form in mid-March 2021 which would see them list a Bitcoin Trust ETF (see CBOE BZX Exchange Rulemaking page). However, all previous attempts have failed, including a 2018 attempt from the Winklevoss twins (of pre-Facebook fame) who had their attempt at a bitcoin ETF rejected (Winklevoss twins bitcoin ETF rejected by SEC) and it wasn’t their first. Despite these rejections, with the incoming chair Gary Gensler being bullish on crpyto and blockchain the signs look far more positive this time.

** Update to paragraph above - as of April 24, the SEC has also begun the review process of another bitcoin ETF, this time from Kryptcoin. They tried, and failed back in 2019 **

One of the issues facing any bitcoin or blockchain related ETF is the lack of investment options available for any issuer who creates one of these. There's less choice than other ETFs since the blockchain and distributed ledger environment is still growing. That said, there are still a number of options out there to invest in including the following equities:

  • HIVE – cryptocurrency mining company based in Canada, Sweden and Iceland

  • COIN – Coinbase, recently listed blockchain exchange

  • MSTR – Microstrategy, a software company that has over 90,000 bitcoins

  • TSLA – Tesla has made significant investments in Bitcoin, using $1.5 billion of cash reseres to invest into the cryptocurrency - but it has paid off with them making $1 billion from this investment

There are global ETFs that investors can get into as well:

  • ARKF – Ark Fintech Innovation ETF which invests in blockchain technology

  • BLOK – Amplify Transformational Data Sharing ETF

  • BLCN – Reality Shares Nasdaq NexGen Economy ETF

  • LEGR – First Trust Indxx Innovative Transaction & Process ETF

  • KOIN – Capital Link Global Fintech Leaders ETF

Some investors may look to BUZZ as a potential option given that this VanEck product has "social sentiment" on its label but the definition of what it invests in is large cap US equities and crypto does not cut it.

Closer to home there are also a number of investment options for locally focused investors with some of these names having blockchain focused projects and others with direct blockchain involvement:

  • ID8 – Identitii, a company that helps financial institutions and their executives improve regulatory compliance and reduce financial crime by increasing trust in data.

  • SMX – Security Matters, a brand protection, supply chain integrity and blockchain technology company.

  • CM8 – Crowd Mobile, a global crowdsourcing micro job business with a focus on mobile applications.

  • YOJ – Yojee, a technology company which has introduced new ways of working, communicating, and collaborating within the logistics industry.

  • MBM – Mobecom, a SaaS helping businesses create customer loyalty and engagement

  • NOV – Novatti is a leading digital banking and payments company that enables fast, simple, and secure payments

  • DCC – DigitalX, a company specializing in blockchain application development and digital asset management services

  • FFG – Fatfish, a tech investment firm that is focused on investments in blockchain and cryptocurrency projects;

  • CCA – Change Financial, holds equity in blockchain and cryptocurrency business IvyProject and is in agreement to develop a blockchain and cryptocurrency technology.

Coupling all of this with news a few weeks ago that Paxos, a blockchain infrastructure provider was able to see trades settle at T+0 with partners Credit Suisse and Nomura Instinet and the future indeed looks bright. This is one of the major advantages of blockchain, it can help to imrove the current normal cycle of trade settlements of T+2 (2 days to settle orders).

All signs point to it not being long until we see a listed blockchain play in the local ETF markets especially with the groundswell of support we're seeing overseas and locally, it is only a matter of time.

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