Sebastian Sinclair

Digital rights group Fight for the Future isn’t convinced by a new CBDC anti-surveillance bill pitched to the US House Financial Services Committee.



US Congressman Tom Emmer introduced the “CBDC Anti-Surveillance Act” earlier this week. Co-sponsored by nine other Republicans, H.R 1122 seeks to amend the Federal Reserve Act to prohibit Fed banks from offering central bank digital currencies (CBDC)s to individuals.



It also seeks to prohibit the use of a digital dollar for the implementation of monetary policy. The act aligns with Emmer’s <a href="https://blockworks.co/news/us-rep-tom-emmer-proposes-bill-to-shape-cbdc-plans" target="_blank" rel="noreferrer noopener">previous attempts</a> to bar the Fed from issuing a CBDC directly to individuals in the name of privacy preservation. 



The fear is that CBDCs could expose individuals to unnecessary surveillance risks by the state — empowered by its newfound ability to track and trace every penny.



“Any digital version of the dollar must uphold our American values of privacy, individual sovereignty and free market competitiveness,” Emmer said in a <a href="https://twitter.com/GOPMajorityWhip/status/1628397390024638466?s=20" target="_blank" rel="noreferrer noopener">statement</a>. “Anything less opens the door to the development of a dangerous surveillance tool.”



Fight for the Future, however, has a problem with Emmer’s alternative to the Fed’s potential handling of CBDC transactions: private financial companies.



“Rep. Emmer is correct that a poorly-built digital dollar would cement surveillance and extremely concerning economic controls into our daily lives,” Fight for the Future said.&nbsp;



It added: “We also agree on the need for the government to be transparent about CBDC projects — but where this bill falls short is in positioning the private sector as the sole option for intermediating digital dollar transactions.”



Invasive surveillance and morality policing are prevalent in various financial institutions such as Wells Fargo and Venmo, the nonprofit said in its own <a href="https://www.fightforthefuture.org/news/2023-02-22-statement-rep-emmer-should-center-users-financial-privacy-not-private-sector-profit" target="_blank" rel="noreferrer noopener">statement</a>. Fight for the Future believes the bill would contribute to endangering vulnerable communities, including activists and abortion patients.



“The well-executed digital dollar the US deserves would provide the same level of privacy that cash has offered for millennia, by design,” the group said. “We need real alternatives with end-to-end encryption level privacy baked into the code itself.”



The Federal Reserve System is composed of 12 regional banks located throughout the US and a Board of Governors located in Washington, D.C.



“Financial surveillance, whether done by the government or financial institutions, treats everyone as if we are guilty until proven innocent and as if privacy is not a fundamental human right,&#8221; said Fight for the Future.



The group posited major financial institutions may resist implementing cash-level privacy, as it would impact profits deriving from exploiting personal data. 



In any case, the legislative process for Emmer’s <a href="https://www.congress.gov/bill/118th-congress/house-bill/1122/text" target="_blank" rel="noreferrer noopener">bill</a> has only just begun. A committee review comes next, before potentially proceeding to the House or Senate for consideration. From there, it would need to be signed by President Joe Biden into law.



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Anti-Surveillance CBDC Bill Won’t Protect Privacy: Advocacy Group

Casey Wagner

A number of US representatives are concerned a government-funded central bank digital currency project will be sold to commercial banks.&nbsp;



Reps. Tom Emmer, R-Minn., and Patrick McHenry, R-N.C., drafted a letter to Susan Collins, head of the Federal Reserve Bank of Boston, Thursday to express concerns over the New York Fed’s Project Hamilton and related privacy issues.



“It has come to Congress’s attention that some firms participating in Project Hamilton intend to use government resources from the project to design a CBDC with the intent to then sell those products to commercial banks,” a Thursday <a href="https://emmer.house.gov/2022/12/emmer-leads-inquiry-into-boston-fed-led-cbdc-effort" target="_blank" rel="noreferrer noopener">statement</a> from Emmer’s team said.



Project Hamilton, a joint venture between the Boston Fed and MIT, is primarily focused on developing a retail digital dollar and corresponding payment channels. The team completed the <a href="https://blockworks.co/news/mit-and-boston-fed-conclude-first-phase-of-cbdc-research-project" target="_blank" rel="noreferrer noopener">first phase</a> of the project in February, when researchers said the concept is scalable and the technology feasible. 



Project Hamilton is giving certain private sector players an unfair advantage — as they would have exclusive access to government-funded research and initiatives — the representatives <a href="https://twitter.com/RepTomEmmer/status/1598412817396293643?s=20&amp;t=OXEWLUEV8BrxwmKN413iPQ" target="_blank" rel="noreferrer noopener">argued</a>. Emmer and McHenry are requesting more information about the involvement of private sector partners.



“The letter also asks how the Fed plans to address concerns that many have regarding the dangers a CBDC could pose to financial privacy and financial freedom, which were the subject of over 65% of the letters in response to the Fed’s January 2022 report on CBDCs,” Emmer representatives said.&nbsp;



CBDC projects in the US have shown signs of progress in recent months. The New York Fed and the New York Innovation Center (NYIC) have partnered on a separate CBDC-related project, known as <a href="https://blockworks.co/news/project-cedar-ny-fed-closer-to-wholesale-central-bank-digital-currency" target="_blank" rel="noreferrer noopener">Project Cedar</a>, which researches what a CBDC might look like in the US and what potential use cases it may have. 



Project Cedar’s phase one results, released in November, show that blockchain and distributed ledger technology allowed for foreign exchange spot settlements to complete in under ten seconds, the NYIC said, showing potentially revolutionary real-world use cases for CBDCs.&nbsp;



“Currently, cross-border transactions function well, but there are opportunities for improvement,” the NYIC said in its report. “In general, it takes around two days for a [foreign exchange] spot transaction to settle.”



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CBDC Will Give Private Players Unfair Advantage, US Reps Warn

As the crypto faces what many are calling its biggest crisis yet, a slew of new politicians are lining up to take their place on Capitol Hill as more-stringent regulation likely looms.&nbsp;



“It’s difficult to know how these midterm elections will impact the crafting of an overall crypto regulatory framework for the United States,” said Joseph Collement, general counsel at Bitcoin.com. “Some believe that Republicans are more friendly to our industry, while others believe that there is possibly an emerging bipartisan consensus over formulating friendly and pro-growth regulation.”&nbsp;



Issues surrounding digital assets were more important than ever this past election cycle, according to <a href="https://cms.blockworks.co/news/poll-us-voters-who-own-crypto-are-on-the-rise-just-in-time-for-midterms/" target="_blank" rel="noreferrer noopener">GMI PAC</a>, a crypto-focused group backed by <a href="https://cms.blockworks.co/tag/anthony-scaramucci/" target="_blank" rel="noreferrer noopener">SkyBridge Capital’s Anthony Scaramucci</a>. “Crypto voters,” which pollsters described as owning or considering owning digital assets, make up 44% of US voters, GMI PAC found. 



As results continue to trickle in, industry proponents ought to be happy to see many crypto-minded candidates have secured a seat on Capitol Hill, which appears to have come at quite the crucial time.&nbsp;



<h3>New names on the Hill&nbsp;</h3>



Harriet Hageman, R-Wyo., for example, took over outgoing Rep. Liz Cheney’s seat. The attorney is keen on maintaining the state&#8217;s growing autonomy over crypto-related matters, she said during a July debate.&nbsp;



“I think that it’s something that we need to be exploring, but we want to keep the federal government out of it,” Hageman said, referring to cryptocurrency mining operations in Wyoming.&nbsp;



Crypto is “an important states’ rights issue,” she added.&nbsp;



Sen. Cynthia Lummis, R-Wyo., a vocal cryptocurrency advocate, praised Hageman’s win Tuesday night, calling her an “excellent teammate” to have in Washington.&nbsp;



Rep. Jonathan Jackson, D-Illi., will also be making his debut in the House in January, largely thanks to an influx of donations from crypto-related political action committees. Three PACs, DAO for America, Web3 Forward and Protect our Future, were all substantial donors to Jackson’s campaign.&nbsp;



The Protect Our Future PAC is bankrolled by the once-revered crypto billionaire Sam Bankman-Fried. His PAC bought $500,026 in television ads, according to the Chicago Sun-Times, during the last campaign cycle.&nbsp;



Crypto could have been enough to sway some voter’s choice,Bobby Kaple, senior advisor to GMI PAC, said.



“Both parties are in a battle to connect with younger Black and Hispanic men — groups that have shown over the past few cycles to be less calcified in their party preference. These groups also own crypto at much higher rates,” Kaple said. “Connecting with them on crypto issues could unlock just enough support to win some of these tight races.”



<h3>Cautiously optimistic&nbsp;</h3>



Congressional Blockchain Caucus Chairs Tom Emmer, R-Minn., and Bill Foster, D-Illi., both won reelection as well as Caucus members Josh Gottheimer, D-N.J., and Richie Torres, D-N.Y. The group, which “believes in the future of blockchain technology” supports a “light touch regulatory approach,” according to its <a href="https://congressionalblockchaincaucus-schweikert.house.gov/about">website</a>.&nbsp;



Meanwhile, New York Governor Kathy Hochul won permanent offices, which may have an impact on bitcoin mining operations in the state. The former lieutenant governor has not yet opted to sign or veto a <a href="https://cms.blockworks.co/news/anti-cryptocurrency-mining-bill-still-alive-in-ny-legislation/" target="_blank" rel="noreferrer noopener">crypto mining bill</a>, which would impact proof-of-work operations. 



Kristin Smith, executive director of the Blockchain Association, is confident bipartisan consensus can be reached, especially given the promising across-the-aisle initiatives seen in the past 18 months. But politicians will not be ignoring the fall of one of the most trusted names in the industry, she warned.&nbsp;



“We had crises in the summer, but this is a different level of crisis, and it&#8217;s going to demand [lawmaker’s] attention,” Smith said. “As this continues to be in the headlines, which I think it will for some time, Congress is going to want to respond.”&nbsp;



It is worth noting that Binance and FTX are not US-based exchanges, Smith added, in fact, each launched its own US subsidiary when the companies were forced to halt operations in the country. Binance US rolled out in 2017, followed by FTX.US in 2019.&nbsp;



“US exchanges don&#8217;t operate like this… that&#8217;s not what they&#8217;re doing,” Smith said. “But that being said, I don&#8217;t think that&#8217;s going to stop Congress from wanting to act.”



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New Crypto-friendly Politicians Are Headed to Washington

Ben Strack

<div id="highlights-block_6245bcca4f9c0" class="highlights">
 <ul>
 <li>A direct-to-consumer CBDC could be used as a “financial surveillance tool” by the federal government, according to Cruz</li>
 <li>Rep. Tom Emmer, R-Minn., introduced a House bill proposing the same objective in January</li>
 </ul>
 
</div>



Sen. Ted Cruz has proposed a bill echoing one introduced in the House in January, in an attempt to maintain the dollar’s dominance without competing with the private sector.



The latest <a href="https://www.cruz.senate.gov/imo/media/doc/cbdc.pdf" target="_blank" rel="noreferrer noopener">planned legislation</a>, introduced by the Republican senator from Texas, would prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.



A direct-to-consumer CBDC could be used as a “financial surveillance tool” by the federal government, similar to what is happening in China, according to Cruz.



“The federal government has the ability to encourage and nurture innovation in the cryptocurrency space, or to completely devastate it,” Cruz said in a statement.



<blockquote class="wp-block-quote">“This bill goes a long way in making sure big government doesn’t attempt to centralize and control cryptocurrency so that it can continue to thrive and prosper in the United States.”</blockquote>



CBDCs differ from decentralized currencies such as bitcoin, as they are issued and backed by a government and transact on a centralized permissioned blockchain.&nbsp;



President Joe Biden signed an executive order earlier this month that calls on a variety of government agencies to study the “responsible development” of digital assets. It also mentions “placing urgency” on the research and potential development of an American CBDC.



Industry watchers <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">previously told Blockworks</a> that though the order is an important step in the policymaking process, concrete legislation could take years.



Rep. Tom Emmer, R-Minn., <a href="https://cms.blockworks.co/us-rep-tom-emmer-proposes-bill-to-shape-cbdc-plans/" target="_blank" rel="noreferrer noopener">introduced a House bill</a> that would prevent the Fed from issuing a CBDC to individuals in January.



The Federal Reserve <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">issued a report</a> that month that expressed potential interest in a CBDC that is “identity-verified” but did not take any policy stance. The agency is soliciting public comments through May 20.



“I’m glad Senator Cruz has agreed to offer a Senate companion to my legislation limiting the Fed’s authorities,” Emmer said in a statement. “The Fed must only craft a CBDC framework that is open, permissionless and private — meaning any digital dollar must be accessible to all, transact on a blockchain that is transparent to all and maintain the privacy elements of cash.”



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Ted Cruz’s Senate Bill on CBDCs Replicates January House Proposal

<div id="highlights-block_620e9515e4909" class="highlights">
 <ul>
 <li>SEC Chair Gary Gensler said his agency must consider whether a spot bitcoin ETF is designed to prevent fraudulent and manipulative acts and practices</li>
 <li>Nearly 100 people have so far weighed in on Grayscale Investments’ proposed conversion of its Bitcoin Trust to an ETF in public comments to the SEC</li>
 </ul>
 
</div>



As the Securities and Exchange Commission refuses to budge on signing off on a spot bitcoin ETF, a growing number of industry participants are urging the regulator to reconsider.



The latest battleground: Grayscale Investments’ proposal to convert its bitcoin trust to an ETF (exchange-traded fund). <a href="https://cms.blockworks.co/grayscale-files-to-convert-its-bitcoin-trust-into-an-etf/" target="_blank" rel="noreferrer noopener">The firm filed</a> to morph the $28-billion Grayscale Bitcoin Trust (GBTC) to an ETF in October after the first bitcoin futures ETF <a href="https://cms.blockworks.co/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading/" target="_blank" rel="noreferrer noopener">began trading</a>.



During the SEC’s 240-day review period, which expires in July, the agency is soliciting feedback from the public.



Andrew Farinelli, a private wealth advisor at Embree Financial, wrote to the SEC that the conversion would reduce costs and improve security for bitcoin investors. Chicago-based Embree, which has 85 institutional clients and 300 families, runs about $1.5 billion.



“Their accounts and investment would often be fully protected under the FDIC, it would be custodied at a trusted institution — [such as] Charles Schwab — and investment itself would be safer under the SEC’s regulation of ETFs,” Farinelli wrote. “Lastly…this allows investment professionals like myself to provide the best guidance to their clients and investors at large.”&nbsp;



SEC Chair Gary Gensler, meanwhile, has given bitcoin ETF hopefuls little reason for optimism. In his latest public comment, Gensler wrote a <a href="https://pbs.twimg.com/media/FLzxM5gUUAsyQOt.jpg" target="_blank" rel="noreferrer noopener">letter</a> Tuesday to US Rep. Tom Emmer, R-Minn., saying the “different holdings” of bitcoin spot and futures products have led to “different regulatory outcomes.” Gensler is “technology-neutral” on the outcome, he wrote.



“When reviewing bitcoin spot ETPs, the commission must apply all the standards of the Exchange Act, which it has followed in connection with its orders considering previous proposals to list bitcoin spot ETPs,” Gensler wrote. “In particular, the commission must consider if the bitcoin spot ETP proposal is designed to prevent fraudulent and manipulative acts and practices.”



The letter followed a November dispatch to Gensler from Emmer and Rep. Darren Soto, D-Fla., saying the agency’s approval of a futures ETF should equate to a greenlight for a spot product.



“We do not understand the SEC’s views around the perceived material difference in risk profiles, since both the futures and spot bitcoin markets are inherently intertwined and bear the same risks regarding fraud and manipulation,” Emmer and Soto wrote.



The stakes are rising. <a href="https://cms.blockworks.co/financial-advisors-bullish-on-crypto/" target="_blank" rel="noreferrer noopener">A survey last month</a> found that the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year. 



Sixty percent cited regulatory concerns as preventing them from making their first or increasing their crypto allocation, while 32% noted the lack of easily accessible investment vehicles, such as ETFs.



The argument of industry powerhouses such as Coinbase is that a spot ETF would lead to an expansion of safe retail investment in bitcoin.



Paul Grewal, chief legal officer at Coinbase, also wrote a letter in support of the conversion in December.&nbsp;



“We believe investors should have access to GBTC in an ETP format because it offers a tried and tested way for retail investors to gain exposure to bitcoin at prices that closely reflect spot Bitcoin trading prices without holding it themselves,” Grewal wrote.



Grewal joined more than <a href="https://www.sec.gov/comments/sr-nysearca-2021-90/srnysearca202190.htm" target="_blank" rel="noreferrer noopener">100 people </a>in writing, with the majority in support of the Grayscale conversion.



“This issue remains a priority for us and we will continue to oversee the SEC in its mission to maintain fair and orderly markets and facilitate capital formation,” Emmer wrote in a Thursday Twitter post.



A spokesperson for Emmer did not immediately return a request for further comment. 



The recent flood of public comments comes after attorneys representing Grayscale Investments <a href="https://cms.blockworks.co/grayscale-attorneys-argue-sec-for-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">called the agency’s decision</a> to approve a futures-based fund and not a spot ETF “arbitrary and capricious.”



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Support for Spot Bitcoin ETF Revs Up as Agency Holds Course

<div id="highlights-block_61deeabc411dd" class="highlights">
 <ul>
 <li>Federal Reserve Chairman Jerome Powell said on Tuesday that a report on digital currencies can be expected in the coming weeks</li>
 <li>The Fed requiring users to set up an account to access a CBDC would put the agency on an “insidious path akin to China’s digital authoritarianism,” Emmer argues</li>
 </ul>
 
</div>



US Rep. Tom Emmer (R-Minn.) has introduced a bill that would prevent the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.&nbsp;



CBDCs differ from decentralized currencies like bitcoin, as they are issued and backed by a government and transact on a centralized permissioned blockchain.&nbsp;



While other countries like China develop CBDCs, it is critical for the US to ensure that its policy around digital currency protects financial privacy, maintains the dollar’s dominance, and cultivates innovation, Emmer said in a Wednesday announcement.



“Requiring users to open up an account at the Fed to access a US CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism,” he noted in a statement.



Emmer had previously stressed during a <a href="https://www.youtube.com/watch?v=Nbdj2E4fuj4" target="_blank" rel="noreferrer noopener">House Financial Services Committee hearing</a> in October that decentralized digital currency can allow society to adapt to the digital economy while maintaining the privacy elements of cash.



The proposed bill comes after Federal Reserve Chairman Jerome Powell <a href="https://cms.blockworks.co/fed-chair-powell-cbdc-and-stablecoins-can-coexist/" target="_blank" rel="noreferrer noopener">said during his confirmation hearing</a> in front of the Senate Banking Committee Tuesday that a report on digital currencies can be expected in the coming weeks. 



<a href="https://cms.blockworks.co/confusion-abounds-as-us-lawmakers-debate-digital-dollar/" target="_blank" rel="noreferrer noopener">Lawmakers have previously debated</a> a theoretical “digital dollar.” The Fed first announced plans to launch a review of the potential benefits and risks of issuing a CBDC in July 2021, with an original expected release date set for September.  



Though Powell had previously argued that a CBDC would render privately issued stablecoins obsolete, he told Sen. Pat Toomey (R-Penn.) during Tuesday’s hearing that the two could co-exist.



“In order to maintain the dollar’s status as the world’s reserve currency,” Emmer added, “it is important that the United States lead with a posture that prioritizes innovation and does not aim to compete with the private sector.”



The proposed bill faces an uncertain future in the Democrat-controlled House.



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US Rep. Tom Emmer Proposes Bill to Shape CBDC Plans

<div id="highlights-block_61896269eb8c6" class="highlights">
 <ul>
 <li>The proposed passively managed ETF is designed to offer investors exposure to the growing intersection of finance, technology, and digital assets</li>
 <li>Grayscale’s brand can help the fund stand out in an increasingly crowded field, ETF.com crypto editor says</li>
 </ul>
 
</div>



As Grayscale Investments awaits approval to convert its flagship bitcoin trust to an ETF, the firm becomes the latest company looking to launch a fund that would offer indirect exposure to bitcoin and other crypto assets through a Grayscale equity ETF. 



The Grayscale Future of Finance ETF (GFOF) would track an index consisting of US and non-U.S. equity securities involved in the advancement of the digital economy, according to a November 5 <a href="https://www.sec.gov/Archives/edgar/data/1540305/000089418921007886/grayscale485a.htm" target="_blank" rel="noreferrer noopener">regulatory filing</a>. 



This includes “companies involved in the enabling of buying, selling, and transacting in digital assets, the development of the infrastructure to create applications utilizing blockchain technology, the supply of infrastructure around the digital asset ecosystem, and the mining of digital assets,” the document notes.&nbsp;



GFOF will not invest in digital assets directly or through the use of derivatives, and will also not invest in initial coin offerings.



The proposed ETF, which does not yet have an expense ratio listed, would be subadvised by Vident Investment Advisory. Its custodian would be US Bank, which <a href="https://cms.blockworks.co/banking-giant-launches-custody-services-for-bitcoin/" target="_blank" rel="noreferrer noopener">announced the roll-out of its crypto custody services</a> for fund managers last month.



“Since our founding in 2013, we have worked to create a suite of secure, familiar investment products that provide investors with access to the digital economy,” a Grayscale spokesperson told Blockworks. “[Friday’s] filing is yet another example of how Grayscale will continue to diversify its product family to meet the increasing demand for future-forward investment opportunities.&#8221;&nbsp;



The filing for what would be Grayscale’s first equity ETF comes as the firm is seeking to convert <a href="https://grayscale.com/products/grayscale-bitcoin-trust/" target="_blank" rel="noreferrer noopener">the Grayscale Bitcoin Trust (GBTC)</a> into an ETF. That fund, which has its shares quoted on OTCQX, has 39.7 billion assets under management.



A handful of other issuers await regulatory clarity for their ETFs that would invest directly in crypto assets. The SEC’s final deadline to rule on VanEck’s bitcoin ETF — meaning the SEC cannot again postpone its decision — is November 14.&nbsp;



US Reps. Tom Emmer (R-Minn.) and Darren Soto (D-Fla.), wrote a letter to SEC Chairman Gary Gensler last week urging the agency to permit physically backed bitcoin ETFs to begin trading.&nbsp;&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We continue to believe investors want and deserve the opportunity to invest in an ETF directly backed by <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a>. It&#39;s heartening to see bipartisan agreement on this point from <a href="https://twitter.com/BlockCaucus?ref_src=twsrc%5Etfw">@blockcaucus</a> co-chairs <a href="https://twitter.com/RepTomEmmer?ref_src=twsrc%5Etfw">@RepTomEmmer</a> and <a href="https://twitter.com/RepDarrenSoto?ref_src=twsrc%5Etfw">@RepDarrenSoto</a>. <a href="https://t.co/UgEkmhPSPw">https://t.co/UgEkmhPSPw</a>&mdash; Grayscale (@Grayscale) <a href="https://twitter.com/Grayscale/status/1456012823214051333?ref_src=twsrc%5Etfw">November 3, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In the meantime, the number of ETFs offering indirect exposure to bitcoin and other crypto assets continues to grow.



<h3>An increasingly crowded field</h3>



ProShares launched the first bitcoin futures ETF on October 19, and Valkyrie Investments launched a similar fund three days later. The first-to-market product has grown to $1.3 billion assets under management, while the assets in Valkyrie’s offering total about $52 million.



Other ETFs already on the market invest in the crypto industry more broadly.



Sumit Roy, crypto editor and analyst at <a href="https://www.etf.com" target="_blank" rel="noreferrer noopener">ETF.com</a>, said Grayscale’s name recognition, distribution and social media presence will likely help its proposed ETF attract assets. However, he noted, many of Grayscale&#8217;s products, most notably GBTC, benefited from being the first mover.



<blockquote class="wp-block-quote">“This latest ETF is somewhat of a late mover and is facing competition from a handful of ETFs already on the market that hold stocks of crypto-related companies,” he said.</blockquote>



Amplify Investments’ actively managed Transformational Data Sharing ETF (BLOK), which has taken the largest share of flows among US blockchain ETFs, stands at $1.6 billion assets under management, with more than half of those assets entering the fund in 2021, Roy noted.



On the passively managed side, the Siren Nasdaq NexGen Economy ETF (BLCN), which became available in 2018, holds more than $300 million. Bitwise Asset Management’s Crypto Industry Innovators ETF (BITQ), which launched in May, now has more than $110 million in assets, while Global X’s Blockchain ETF (BKCH), which hit the market in July, has about $87 million.&nbsp;



Most recently, Valkyrie <a href="https://cms.blockworks.co/two-new-valkyrie-funds-planned-for-bitcoin-exposure/" target="_blank" rel="noreferrer noopener">applied with the SEC</a> to launch an ETF that would invest in bitcoin miners and another focused on companies involved in the space, such as bitcoin custodians, exchanges or traders, as well as those that invest in or have a portion of their assets accounted for by direct bitcoin holdings.



Roy said he believes Grayscale’s proposed ETF could ultimately differentiate itself within the crowded field.



“Grayscale is just such a strong brand within the crypto community and even though there is competition from BLOK and others, it is still pretty early for an ETF category that is likely to grow many-fold from here in the years to come,” he explained. “Ultimately, the performance of these funds — which are likely to vary significantly from ETF to ETF — may drive flows and play a part in determining which ends up being the biggest.”