Ben Strack

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 <ul>
 <li>The filing by Charles Schwab’s asset management arm follows similar proposals by competitors BlackRock and Fidelity Investments</li>
 <li>Charles Schwab CEO Walt Bettinger called cryptocurrencies “hard to ignore” in January</li>
 </ul>
 
</div>



Charles Schwab’s asset management arm is looking to join the crypto ETF fray, following industry heavyweights like BlackRock and Fidelity Investments.



The fund group filed to launch an index-tracking ETF offering exposure to companies involved with digital assets, as well as business activities connected to blockchain technology, according to <a href="https://www.sec.gov/Archives/edgar/data/1454889/000110465922029220/tm226059d1_485apos.htm" target="_blank" rel="noreferrer noopener">a Wednesday regulatory disclosure</a>.



The proposed Schwab Crypto Economy ETF plans to invest at least 80% of net assets in stocks included in the Schwab Crypto Economy Index. The filing did not list a ticker or expense ratio.



The fund would not invest in digital assets directly.



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



Charles Schwab CEO Walt Bettinger told Bloomberg in January <a href="https://cms.blockworks.co/ceo-of-financial-services-giant-charles-schwab-calls-cryptocurrencies-hard-to-ignore/" target="_blank" rel="noreferrer noopener">cryptocurrencies are “hard to ignore”</a> and “fairly significant.”



A Schwab spokesperson <a href="https://cms.blockworks.co/blockchain-etfs-gaining-steam/" target="_blank" rel="noreferrer noopener">told Blockworks that month</a> the company offers third-party mutual funds and ETFs with crypto ties through its brokerage platform and was “evaluating how and when we could offer our clients additional opportunities for exposure to cryptocurrencies.”



The Schwab filing follows BlackRock’s, the world’s largest asset manager, <a href="https://cms.blockworks.co/blackrock-files-for-crypto-etf/" target="_blank" rel="noreferrer noopener">filing to launch</a> an ETF focused on blockchain technology in January. Fidelity Investments <a href="https://cms.blockworks.co/fidelity-plots-crypto-etfs/" target="_blank" rel="noreferrer noopener">revealed plans a week later</a> to bring to market ETFs that would invest in companies involved in the metaverse and crypto more broadly.



The bank’s asset management arm oversaw roughly $380 billion of assets within index mutual funds and ETFs, as of Sept. 30, the most recent data available.



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Charles Schwab Latest ETF Heavyweight To Propose Crypto Fund

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 <ul>
 <li>The Amplify Inflation Fighter ETF (IWIN) can invest up to 20% of net assets in bitcoin futures contracts and the Grayscale Bitcoin Trust (GBTC)</li>
 <li>The firm would only seek to launch a spot bitcoin ETF if it could offer something “different and compelling,” CEO says</li>
 </ul>
 
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Despite the recent market downturn, the head of Amplify ETFs is bullish on bitcoin as a hedge against inflation — and plans to ramp up exposure to the digital asset in the firm’s latest exchange-traded fund. 



The company, perhaps best known for its Amplify Transformational Data ETF (BLOK), launched its Inflation Fighter ETF (IWIN) earlier this month.



The fund seeks to identify stocks and commodities — such as agriculture, energy, precious metals and bitcoin — positioned to weather inflation. The consumer price index <a href="https://cms.blockworks.co/market-recap-inflation-keeps-rising-stocks-and-cryptos-slide/" target="_blank" rel="noreferrer noopener">increased 0.6% in January</a>, pushing the year-over-year figure to 7.5% — the quickest rise since 1982.



Inflation, in theory, should be good for bitcoin, but its price hit $37,000 earlier this month and is now down nearly 40% from its November high of $69,000.



“We’d argue that what’s happened in the last few months is more about a risk-off trade given the global macro environment of raising rates being expected from the US central bank,” Amplify CEO Christian Magoon told Blockworks. “Usually that global macro passes and factors matter, and we still think that bitcoin is something you want to own … in an inflationary environment.”



IWIN’s bitcoin exposure is capped at 20% of net assets and consists of bitcoin futures trading on the Chicago Mercantile Exchange (CME), including up to 15% in Grayscale Bitcoin Trust (GBTC). It does not hold bitcoin directly.



The fund’s allocation to GBTC and bitcoin futures will likely increase over time, Magoon said.&nbsp;



Dave Nadig, chief investment officer and director of research of ETF Trends and ETF Database, said WisdomTree “opened the door” <a href="https://cms.blockworks.co/which-mutual-funds-etfs-are-making-crypto-related-investments/" target="_blank" rel="noreferrer noopener">by allowing</a> its Enhanced Commodity Strategy Fund (GCC) to invest up to 5% in bitcoin futures.



“I think this is going to be increasingly common,” Nadig told Blockworks. “Since the best most traditional finance folks can do with bitcoin is think of it as digital gold, it makes sense to see it as a small allocation in a commodities or inflation strategy.”



<h3 class="wp-block-heading">BLOK’s evolution, future products</h3>



While IWIN gains exposure to bitcoin through GBTC and futures contracts, Amplify’s Transformational Data ETF invests in blockchain and crypto companies, as well as Canadian spot bitcoin ETFs.



BLOK, the largest blockchain ETF in the US, has grown to about $1 billion since launching in January 2018.



Four years ago, the fund’s holdings were limited to several mining and semiconductor companies, as well as companies investing in private blockchain stakes. It now consists of more pure-play blockchain companies, Magoon noted.



The fund’s top five holdings are SBI Holdings, Coinbase, Nvidia, CME Group and Silvergate. Rounding out the top 10 are Hut 8 Mining, Galaxy Digital, GMO Internet, Hive Blockchain Technologies and MicroStrategy.



“Most of the development and opportunity in the world of blockchain has been in that one single application of cryptocurrency,” Magoon said. “Most of the companies that are in the portfolio have a fairly high correlation to the direction of crypto.”



BLOK could end up investing in US spot bitcoin ETFs and spot ether ETFs — if the US Securities and Exchange Commission gives them the greenlight — as well as crypto assets directly.



Amplify filed for a Decentralized Finance &amp; Crypto Exposure ETF in September. Magoon declined to share an update.&nbsp;



The fund plans to invest about half its assets in the stocks of DeFi companies, and the remainder in bitcoin futures, bitcoin ETFs and GBTC.



<h3 class="wp-block-heading">A spot bitcoin ETF?</h3>



Though some industry watchers <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">say</a> they don’t expect a spot bitcoin ETF to launch in the US until at least 2023, Magoon said it’s likely the SEC will approve one this year.



Futures-based bitcoin ETFs, which the SEC permitted to launch in October, are “messy,” Magoon said, adding that they bring complexities and risks to investors.



“For the SEC to believe the best product for investors is a futures-based product seems questionable at best when spot price products are available in North America, are functioning appropriately, use the same benchmark as futures-based products, cost less and deliver performance that’s nearly identical to the underlying investment objective,” he said.



Amplify is considering launching a spot bitcoin ETF, Magoon said, adding that competition is steep, as about a dozen other firms have undertaken similar steps.&nbsp;



“Generally our brand, our approach is not to launch the fifth or the 10th version of what’s already out there,” he said. “So if you’re not the first or the second or the third or the seventh, you better have something that’s quite different or compelling.”



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exchange-traded funds