Fidelity Investments, one of the largest asset managers in the world, has filed a new application with the U.S. Securities and Exchange Commission (SEC) to launch a spot bitcoin exchange-traded fund (ETF).
The filing, dated June 28, 2021, reveals that the proposed fund, called the Wise Origin Bitcoin Trust, will track the performance of bitcoin as measured by the Fidelity Bitcoin Index PR, a proprietary index that reflects the spot price of bitcoin across major exchanges.
The fund will not invest in bitcoin futures contracts or other derivatives but will hold bitcoin directly in cold storage with a qualified custodian. This makes it different from most of the other bitcoin ETF applications that have been submitted to the SEC, which are based on bitcoin futures markets.
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According to the filing, the fund’s sponsor is FD Funds Management LLC, a subsidiary of Fidelity, and its trustee is The Bank of New York Mellon Corporation. The fund’s bitcoin custodian is Fidelity Digital Asset Services LLC, another subsidiary of Fidelity that provides institutional-grade custody and execution services for digital assets.
The filing also states that the fund will trade on the NYSE Arca exchange under the ticker symbol FBTC, and that its annual fee will be 0.9% of the net asset value of the fund.
The filing comes as the SEC is reviewing several other bitcoin ETF applications but has not yet approved any of them. The regulator has repeatedly expressed concerns about the potential for fraud and manipulation in the bitcoin market and has asked for more data and public comments from the applicants.
Fidelity, however, may have an edge over its competitors, as it has a long history and reputation in the financial industry, and has been actively involved in the bitcoin space for several years. The company launched its digital asset unit in 2018 and has since offered custody and trading services to institutional investors. It also launched the Fidelity Bitcoin Index PR in 2020 and has conducted several surveys and research reports on bitcoin and other cryptocurrencies.
Fidelity’s CEO, Abigail Johnson, is also known to be a proponent of bitcoin, and has publicly stated that she believes in its potential as a store of value and a hedge against inflation. In a recent interview with Barron’s, she said that she hopes that the SEC will approve a spot bitcoin ETF soon, and that Fidelity would be ready to support it.
“We continue to see increasing demand from a diverse set of clients who are seeking access to bitcoin through a variety of investment products,” she said. “We are committed to providing our clients with the best possible service and support as they explore this emerging asset class.”
The demand for a spot Bitcoin exchange-traded fund (ETF) is high among American investors, according to Coinbase’s chief policy officer, Jigar Grewal. In a blog post published on Thursday, Grewal argued that a spot Bitcoin ETF would provide more transparency, liquidity and efficiency to the crypto market, as well as align with the preferences of retail and institutional investors.
Grewal cited a recent survey conducted by Coinbase and Global X, an ETF provider, which found that 58% of U.S. investors would prefer to invest in a spot Bitcoin ETF over a futures-based one. A spot Bitcoin ETF would track the price of the underlying asset directly, while a futures-based one would track the price of Bitcoin futures contracts traded on regulated exchanges.
Grewal also pointed out that a spot Bitcoin ETF would avoid the complexities and costs associated with rolling over futures contracts, which can create tracking errors and performance gaps between the fund and the underlying asset. He added that a spot Bitcoin ETF would also reduce the risk of market manipulation and increase market efficiency by allowing arbitrage opportunities between the fund and the spot market.
Grewal acknowledged that the U.S. Securities and Exchange Commission (SEC) has expressed concerns about the lack of regulation and oversight in the crypto spot market, but he argued that Coinbase and other regulated crypto platforms have implemented robust compliance and security measures to protect investors and prevent illicit activities. He also noted that the SEC has approved several spot ETFs for other assets, such as gold and silver, that rely on unregulated markets for price discovery.
Grewal urged the SEC to approve a spot Bitcoin ETF as soon as possible, saying that it would benefit investors, the crypto industry and the U.S. economy. He said that Coinbase is ready to work with the SEC and other stakeholders to address any outstanding issues and provide a safe and reliable way for Americans to access the crypto market.