WisdomTree Plans to Launch More Crypto Offerings in 2022
Firm looks to offer “proof of concept” for how DeFi can transform financial services.
WisdomTree CEO Jonathan Steinberg | Source: WisdomTree
- WisdomTree expanded its digital assets team to include a global head of financial crimes focused on anti-money laundering and regulatory compliance
- ETF product development among the ways the asset manager is positioning itself for “a reorientation of financial services around DeFi concepts,” its head of digital assets says
WisdomTree is looking to bring more crypto products to investors in 2022 while also focusing on how blockchain can change the financial world more broadly.
“We think it’s going to be both a proof of concept but also a real demonstration of the types of value DeFi and [distributed ledger technology]-related can bring to what you might call more traditional financial services,” Will Peck, WisdomTree’s head of digital assets told Blockworks in an interview.
As part of these efforts, the fund group, which had about $76 billion in assets under management as of last month, filed in April to launch a Digital Short-Term Treasury Fund.
Though the fund’s transfer agent, Securrency Transfers, will maintain the official record of share ownership in book-entry form, it will also be recorded, or digitized, on the blockchain.
WisdomTree had led a nearly $18 million Series A funding round for Securrency, a developer of institutional-grade blockchain-based financial and regulatory technology, in January 2020.
“Through the app made available by WisdomTree and by leveraging Securrency’s blockchain infrastructure technology, it is anticipated that fund shareholders will have the benefit of shares that will be able to operate on more than one blockchain, including the Stellar and Ethereum blockchains, via a bridge to facilitate interoperability between blockchains,” the document notes.
The fact that the record will be made available on various blockchains, with the ability to transfer the record from one blockchain to another, is “a glimpse of the future,” according to Sumit Roy, crypto editor and analyst at ETF.com.
“In the future, it’s conceivable that the official record could live on the blockchain and investors will be able to trade their shares peer-to-peer through the blockchain,” Roy told Blockworks. “There are a lot of regulatory hurdles before we get there, but this is a step in that direction.”
Expanding its digital assets team
The firm most recently expanded its digital assets team, which now includes 12 members across the United States, United Kingdom and Ireland. The unit, which notably added a four-person research team, is dedicated to technology, compliance, legal, product, marketing, research and education related to digital assets, blockchain and decentralized finance (DeFi).
Among the new hires was John Davidson, who joined WisdomTree as global head of financial crimes. In the new role, he is focused on anti-money laundering, or AML, and regulatory compliance.
Davidson had held a similar position at E-Trade and was a managing director at Morgan Stanley. Prior to that, he spent 19 years as an enforcement attorney and AML policy specialist at the Office of Thrift Supervision, the Federal Reserve’s Board of Governors and the US Securities and Exchange Commission (SEC).
“We are embracing responsible DeFi that upholds the foundational principles of regulation in this innovative and quickly evolving space,” WisdomTree CEO Jonathan Steinberg said in a statement. “We’re a company rooted in innovation and transparency, and we see responsible DeFi as the next chapter for us and the broader financial services industry as a whole.”
WisdomTree expects more technology-focused hires in 2022, a spokesperson noted, as it looks to add to its existing application development team, which develops all client-facing analytics tools.
Other US ETFs
The WisdomTree Enhanced Commodity Strategy Fund (GCC) — an actively managed ETF seeking to provide broad exposure to a diversified basket of commodities — last month became the first ETF to add bitcoin futures.
The addition came just before the launch of bitcoin futures ETFs by ProShares and then Valkyrie Investments.
WisdomTree also filed with the SEC last month to add bitcoin futures to its Managed Futures Strategy Fund (WTMF). The ETF, which invests in the futures contracts of 21 commodities — such as crude oil, natural gas, gold, silver and corn — was also seeking to invest up to 5% of its net assets in bitcoin futures contracts.
The firm has proposed a bitcoin ETF that would invest in the crypto asset directly, though it, along with similar offerings from a range of issuers, awaits SEC approval. Steinberg said during an interview at Blockworks’ Digital Asset Summit in September that the SEC’s hesitancy to allow a bitcoin ETF is forcing investors into inferior structures.
“We think there’s some questions and issues with a futures-based bitcoin product; obviously the contango and the position limits kind of leads to an experience where you can get significant tracking error from spot,” Peck said. “So we haven’t been focused on futures in the past, and we think the ultimate best execution is in a spot ETF.”
The firm is generating $4 million of run rate revenue from its crypto exchange-traded products in Europe, Steinberg said during the firm’s third quarter earnings call last month. It launched a physically backed bitcoin ETP in 2019 and brought an Ethereum product to the European market earlier this year.
Additional strategies, such as “crypto basket” exchange-traded products, are in the product development pipeline, WisdomTree President and COO Jarrett Lilien said during the earnings call.
In the US, Steinberg said he sees a big opportunity for advisors to give their clients crypto exposure through models and separately managed accounts. He noted that the latter vehicle may be financial intermediaries’ preference amid regulatory uncertainty around crypto ETFs.
WisdomTree also partnered with Onramp, a workflow company for registered investment advisors, and crypto exchange and custodian Gemini.
The shared initiative, to bring crypto to advisors, got its first model win during the third quarter, executives revealed. Federal Life announced the launch of a variable annuity product that implements a WisdomTree model, comprising nearly two-thirds direct crypto and one-third disruptive technology ETFs.
“Long-term, we think there’s going to be a reorientation of financial services around DeFi concepts,” Peck told Blockworks. “Maybe that involves more regulation or regulatory approvals or kind of some changes to how it is today, but we think it’s coming, and we want to position ourselves for that future.”
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