New Proposed ETF To Mix Bitcoin Futures With Sovereign Debt

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New Proposed ETF To Mix Bitcoin Futures With Sovereign Debt

According to the terms of a newly suggested exchange-traded fund (ETF), it aims to have investments in a broad portfolio of blockchain products which would combine Bitcoin futures with other sovereign debt instruments.

Reality Shares ETF Trust, a subsidiary of Blockforce Capital in partnership with NYSE Arca filed a form N1-A with the U.S. Securities and Exchange Commission (SEC). The proposal that was signed on Monday seeks to launch a unique ETF that spreads its investments across a number of trade instruments.

The proposal which is subject to official approval seeks to include short-term, sovereign debt instruments accepted for trading on exchanges in the United States, Bitcoin futures and mutual funds within the money market. The high-quality debt instruments will be represented in accepted global currencies such as the U.S. dollar, Euro and Swiss francs.

The major peculiarity of the fund is the investment in cash based Bitcoin futures contracts. This is a clear departure from the usual physically settled contracts where the investor receives the Bitcoin after the expiration of the contract in question. The new Reality Shares ETF will pay such investors the cash equivalent of the contract value. This means that this new fund is in actual fact not investing in Bitcoin directly.

The details of the proposal further specifies that the portfolio will invest 15% of the fund’s assets in Fixed income securities denominated in each of the approved global currencies, another 15% will represent notional exposure in Bitcoin futures while 10% of the fund’s net assets will be invested in money market instruments for cash or margin management purposes as determined at the period of actual purchase.

In addition, the adviser will look to reassign the fund’s assets to the target portfolio one business day after any of the global currencies within the 15% fixed income securities moves up by more than 20% or goes down from its original investment value. The new ETF “Reality Shares” will initially move to place its Bitcoin futures investment with Cboe and CME who are two of the largest futures exchanges within Chicago.

Although there was an ETF proposal by Bitwise Asset Management in partnership with NYSE Arca last month alongside another filing by VanEck/SolidX, the latter being mooted as a potentially promising venture based on its similarity with an earlier proposal, its status has been further put in doubt after the earlier proposal was withdrawn in the wake of the extended shutdown of the U.S government.

However, the Reality Share’s proposal is clearly different from the other two ETFs by virtue of its inclusion of sovereign debt instruments which are not included in any of the filings made last month. This proposal is yet to appear on the SEC’s official website due to the fact that the commission is yet to start evaluating it.

The process is expected to start after the proposal is filed in the Federal Register. In line with standard procedures, the SEC will have to take a decision on the status of the proposed rule change within 240 days.