Ben Strack

<div id="highlights-block_625d7b0c9b850" class="highlights">
 <ul>
 <li>Registered digital securities will become “the new de facto digital marketplace,” Digital Funds&#8217; founder says</li>
 <li>WisdomTree filed last year to launch a Digital Short-Term Treasury Fund that would secondarily record its shares on one or more blockchains</li>
 </ul>
 
</div>



A newly created digital asset manager that filed last month for its first ETF is seeking to bring another offering to market.



Digital Funds has filed to launch a Tokenized S&amp;P 500 EW Index Fund that would primarily invest in the securities of issuers included in the S&amp;P 500 Equal Weight Index, according to <a href="https://www.sec.gov/Archives/edgar/data/0001894485/000114036122014131/brhc10036259_n1a.htm" target="_blank" rel="noreferrer noopener">a regulatory disclosure</a> filed last week.



Though the fund’s official record of share ownership would be maintained in book-entry form, they will also be recorded — as digital tokens — on the Algorand blockchain, the filing states. Fund shares may eventually be recorded on other blockchain protocols.



The fund will not invest in any assets that rely on blockchain technology, such as cryptocurrencies, the filing states.



Michael Willis, who founded Digital Funds in December, told Blockworks that registered digital securities will become “the new de facto digital marketplace” as the unregistered space endures more scrutiny from regulators.&nbsp;&nbsp;



“Until now, the registered digital securities marketplace has lacked a high-quality, easy-to-price, immediately recognizable security,” he added. “Therefore, adoption has been limited. We believe the approval of a marquee tokenized index fund has the potential to break adoption wide open.&#8221;



Similarly, WisdomTree <a href="https://www.sec.gov/Archives/edgar/data/1859001/000119312521136968/d156395dn1a.htm" target="_blank" rel="noreferrer noopener">filed last year</a> to launch a Digital Short-Term Treasury Fund that would secondarily record its shares on one or more blockchains.&nbsp;



Sumit Roy, crypto editor and analyst for ETF.com, previously told Blockworks that it’s conceivable for the shares’ official record to live on the blockchain in the future — allowing investors to trade their shares peer-to-peer — but noted there are regulatory hurdles to get past first.&nbsp;&nbsp;



The latest Digital Funds filing comes after the Florida-based firm <a href="https://cms.blockworks.co/new-digital-asset-manager-files-for-first-etf/" target="_blank" rel="noreferrer noopener">revealed plans last month</a> to launch an S&amp;P 500 Bitcoin 75/25 Index ETF. The proposed fund would invest roughly 75% of its assets in large US companies within the S&amp;P 500 Index and about 25% of its assets in bitcoin futures contracts.



Willis called bitcoin “really volatile” at the time, noting that the S&amp;P 500 exposure provides more stability to a bitcoin portfolio.



“We believe registered digital securities will replace the current financial legacy system because they are better engineered at every level,” Willis said, noting the advantages of selling from anywhere at any time, with immediate settlement. “Self-banking and peer-to-peer payments is a dream once thought impossible, but shortly will be a reality.”



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Digital Funds Seeks to Launch Tokenized S&P 500 Fund

<div id="highlights-block_623223ed68577" class="highlights">
 <ul>
 <li>Digital Funds founder Michael Willis said he expects digital assets to “replace the financial legacy system”</li>
 <li>The company plans to file for a spot bitcoin ETF and other crypto-focused products</li>
 </ul>
 
</div>



A new digital asset manager has filed for its first ETF, which seeks to offer exposure to the S&amp;P 500 Index while also providing limited access to bitcoin.&nbsp;



The Digital Funds S&amp;P 500 Bitcoin 75/25 Index ETF would invest roughly 75% of its assets in large US companies within the S&amp;P 500 Index and about 25% of its assets in bitcoin futures contracts, according to a March 11 regulatory disclosure.



Amid unusual market conditions for bitcoin futures contracts, the fund may invest in the Grayscale Bitcoin Trust (GBTC) or through bitcoin ETFs trading in other countries, the filing states. The ETF does not invest directly in bitcoin.



Michael Willis, who is slated to serve as the ETF’s portfolio manager, called bitcoin “really volatile,” noting that the S&amp;P 500 exposure provides more stability to a bitcoin portfolio.



“The apex asset for Wall Street is the S&amp;P 500 Index, and the apex asset for the digital world is bitcoin,” he told Blockworks.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“It’s our marrying of the two investment ecosystems that are out there in two broad categories.”</blockquote>



A small allocation to bitcoin has historically improved the risk/return characteristics of a diversified portfolio, said Nathan Geraci, president of <a href="https://etfstore.com" target="_blank" rel="noreferrer noopener">The ETF Store</a>. Given the volatility of bitcoin, he added, appropriate position sizing and disciplined rebalancing are critical to realize these potential benefits.



Geraci likened Digital Funds’ proposed ETF to Simplify ETFs’ US Equity PLUS GBTC ETF (SPBC), which can allocate up to 15% in GBTC. The fund, which launched last May, has grown to roughly $100 million in assets under management.



“My sense is there’s a limited audience for these types of products, as I think most advisers and investors are inclined to pursue a standalone allocation to bitcoin,” Geraci said. “The ETFs bundling various asset classes typically have an uphill climb to success.”



<h3 class="wp-block-heading">Digital assets are “the future”</h3>



Willis founded Digital Funds in December. He had formerly founded Wall Street financial technology company ONEFUND and has been the lead portfolio manager for the Index Funds S&amp;P 500 Equal Weight mutual fund since its inception in 2015.



Prior to that, Willis worked in the investment banking industry for UBS Financial Services, Paine Webber and Smith Barney.



Digital Funds’ products will all be focused on digital asset investments, Willis told Blockworks. The company is planning to file for a few additional products, including a spot bitcoin ETF.



The Securities and Exchange Commission <a href="https://cms.blockworks.co/will-bidens-executive-order-speed-up-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">has not yet approved</a> an ETF that would invest directly in bitcoin but has permitted those investing in bitcoin futures contracts to launch. Willis said he does not expect the agency to approve a spot bitcoin ETF anytime soon. 



Still, Willis said he expects digital assets to “replace the financial legacy system.” Though the first $2 trillion or so in assets that have entered the space have been mostly unregulated, he noted a wave of regulated digital investment products is coming.



“You have immediate settlement, you have 24/7 trading, you have programmable tokens,” he said. “It’s the future, but we think investors want a safe and secure way of getting into that space. All of our products will be registered with the SEC, and we think that’s the key to unlocking the larger assets.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.