WisdomTree Amends Bitcoin ETF Application

Fund group names US Bank as custodian of its proposed trust after SEC rejection


Source: Blockworks


key takeaways

  • The US Securities and Exchange Commission (SEC) denied WisdomTree’s spot bitcoin ETF in a Dec. 1 letter
  • The ETF’s proposed custodian, US Bank, rolled out its crypto custody services for fund managers in October

WisdomTree amended its application for an ETF that would invest directly in bitcoin after the US Securities and Exchange Commission (SEC) rejected its proposal for such a product last week.

“The trust is not registered under the Investment Company Act of 1940, as amended,” according to a Dec. 8 filing. “However, the sponsor is applying certain of the substantive requirements of the 1940 Act to the operations, infrastructure and oversight of the Trust [in] order to provide investors with some of the significant protections of the 1940 Act.”

As part of the changes, the WisdomTree Bitcoin Trust would use US Bank as a qualified custodian, the SEC disclosure indicates.

US Bank rolled out its crypto custody services for fund managers in October. A company announcement noted at the time that the custody services are intended for institutional investment managers with private funds in the US or Cayman Islands who would like to secure their bitcoin.

Bitcoin-focused financial services company NYDIG was also named the first crypto sub-custodian announced in US Bank’s network of providers.

US Bank had announced in April that it would administer NYDIG’s planned bitcoin ETF this year, pending regulatory approvals. That same month, US Bank participated in a funding round for blockchain-based financial and regulatory technology firm Securrency.

US Bank Wealth Management and Investment Services had about $8.6 trillion in assets under custody and administration and $282 billion in assets under management, as of June 30.

A spokesperson for the company did not immediately return Blockworks’ request for comment.

Though not technically a bank, Fidelity also offers custody services for bitcoin ETFs, noted Sumit Roy, crypto editor and analyst at ETF.com

“That said, it is much more common to see a firm like Coinbase act as a custodian, and that’s for good reason,” he told Blockworks. “They have been providing crypto custody services for a long time, and they have a great reputation.”

Also, under the 1940 Act, the WisdomTree Bitcoin Trust will provide daily disclosures required for ETFs, such as its portfolio holdings, net asset value per share, market price and any premium or discount as well as its media bid-ask spread, according to the amended filing. The trust’s financial statements will be audited at least annually by an independent registered public accounting firm and WisdomTree will comply with financial record keeping and reporting requirements under the Sarbanes-Oxley Act of 2002.

A WisdomTree spokesperson for the fund group declined to comment beyond the filing.

Still no spot bitcoin ETF in US

SEC Chairman Gary Gensler said during a virtual forum in August that the agency would prefer ETFs filed under the Investment Company Act of 1940 that were limited to bitcoin futures contracts. ProShares launched the US’s first futures-based ETF in October and a couple of issuers have brought to market similar offerings.  

The amended application comes after the SEC wrote a letter on Dec. 1 denying WisdomTree’s proposed spot bitcoin ETF intended for the US market. 

Similar to the SEC’s rejection of VanEck’s planned bitcoin ETF, the SEC notes that the Cboe BZX Exchange, on which the ETF’s shares would trade, did not meet certain requirements of the Securities Exchange Act of 1934. A section of the law requires a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and to protect investors.

The rejection of VanEck’s proposed product led to many industry professionals saying they do not expect the SEC to allow a spot bitcoin ETF to hit the US market until the second half of 2022, at the earliest. 

“I don’t think this is going to necessarily move the needle in terms of the SEC approving a spot bitcoin ETF,” Roy said of WisdomTree’s amendments.

WisdomTree manages roughly $75 billion assets, globally. The firm has spot bitcoin and Ethereum ETFs trading in Europe and added several physically backed cryptocurrency basket exchange-traded products in the region last month.

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