Ben Strack

Despite WisdomTree lagging behind other fund issuers in terms of bitcoin ETF inflows, executives said they expect a boost as more financial advisers allocate to such products.



On a Friday earnings call, the company’s Chief Operating Officer Jarrett Lilien emphasized that the firm&#8217;s consumer app offers a better way to hold bitcoin than does the ETF wrapper.



WisdomTree hit $100 billion in assets under management at the end of 2023, marking a record for the firm. But the US spot bitcoin fund it launched on Jan. 11 alongside nine competitors has seen about $10 million of inflows in the first 15 trading days, Bloomberg Intelligence data shows.



The inflow total is the lowest of the nine US spot bitcoin ETFs that have brought in assets so far. That excludes Grayscale Investments’ Bitcoin Trust ETF (<a href="https://blockworks.co/tag/gbtc">GBTC</a>), which had about $28 billion in assets when it converted to an ETF and has seen more than $5 billion in outflows since.&nbsp;



<a href="https://blockworks.co/news/blackrock-fidelity-etf-flows-race">Funds by BlackRock and Fidelity have led the pack</a> with their inflows amounting to about $3 billion and $2.5 billion, respectively, as of Thursday. Despite the heavy GBTC outflows, the 10 funds have collectively tallied about $1.5 billion of net inflows.&nbsp;&nbsp;



“We’re confident in our ability and our track record in growing [assets under management],” Lilien said during the company’s earnings call Friday. “That said, it does take time, especially in our model, because these products are not yet available on many adviser platforms, which is where we would expect to see most of our flows.”



Read more: <a href="https://blockworks.co/news/wealth-managers-bitcoin-etfs">‘Primary market’ for bitcoin ETFs largely hasn’t yet adopted such funds</a>



The chief operating officer previously called the wealth management channel the firm’s “primary distribution channel for US ETFs,” in an email to Blockworks — noting it would work to educate its partners on the asset class and the new <a href="https://blockworks.co/tag/wisdomtree">WisdomTree</a> product.



After addressing the slow growth of the firm’s US bitcoin fund, Lilien argued that the use case for bitcoin is better within WisdomTree’s consumer app than it is in an <a href="https://blockworks.co/tag/etfs">ETF</a>.&nbsp;



The asset manager <a href="https://blockworks.co/news/wisdomtree-prime-app-new-features-blockchain-enabled">launched its WisdomTree Prime app last year</a>. It offers users access to a range of digital funds — with share ownership records kept on the Stellar or Ethereum blockchains — as well as dollar and gold tokens, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>).



Executives said Friday that WisdomTree aims to make the app — currently available to users in 38 US states — accessible to the country’s whole population later this year.



“Not only can you hold bitcoin together with other digital assets, but you also get added utility in the form of payments and peer-to-peer functionality that doesn’t come with an ETF,” Lilien said.



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WisdomTree exec downplays firm’s slow bitcoin ETF launch

A fund group that manages $94 billion in assets is prepping new features for its “blockchain-enabled” consumer app that is now available in more states.&nbsp;



The WisdomTree Prime app went live in 21 states in July — with executives saying at the time that the firm would look to expand the product’s reach and capabilities in the coming months.



The app is now available in 11 more states — Alaska, Arkansas, Florida, Mississippi, Nebraska, New Mexico, North Dakota, South Dakota, South Carolina, Vermont and West Virginia — a WisdomTree spokesperson told Blockworks Wednesday.&nbsp;



The New York-based company is navigating the different regulatory regimes of the remaining states, according to Will Peck, <a href="https://blockworks.co/tag/wisdomtree">WisdomTree’s</a> head of digital assets. The hope is for WisdomTree Prime to be available to “the vast majority of the US population” by the end of 2023, he said.&nbsp;



WisdomTree Prime offers nine digital funds — with share ownership records kept on the Stellar or Ethereum blockchains — as well as dollar and gold tokens, bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>).



Read more: <a href="https://blockworks.co/news/wisdomtree-blockchain-native-app">WisdomTree to leave ‘no stone unturned’ with new blockchain-native app: CEO</a>



Along with adding states <a href="http://blockworks.co/news/blockchain-wisdomtree-app">in which the app is available</a>, WisdomTree looks to launch new features and assets to the app — including debit card connectivity, peer-to-peer functionality and additional funding options.



“We are seeing that customers are looking for a unified save, spend and invest experience,” Peck told Blockworks in an email. “With elevated interest rates, customers are becoming increasingly aware of the yield they may be missing out on if they are sitting on cash in checking accounts. We think <a href="https://blockworks.co/tag/wisdomtree-prime">WisdomTree Prime</a> offers some great options for customers in this area.”



Among the digital funds offered on the app, for example, are index products that track the performance of US Treasury obligations with different maturities.



The <a href="https://blockworks.co/tag/federal-reserve">Federal Reserve</a> has hiked up the federal funds rate to a current target between 5.25% and 5.5% — a level that makes short-term Treasury bills a more attractive investment.



Tokenized offerings that give investors exposure to US Treasury yields have proliferated this year, including <a href="https://blockworks.co/news/on-chain-investors-us-treasury">a fund by Adapt3r Digital</a> on decentralized marketplace Archblock, as well as <a href="https://blockworks.co/news/ondo-launches-on-chain-treasurys-bonds">US Treasury and bond offerings by Ondo Finance</a>.&nbsp; &nbsp;&nbsp;



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WisdomTree extends reach of Prime app, plots new features

WisdomTree has rolled out its new financial app that mixes crypto, digital funds and tokenized physical assets such as gold.



The company — a fund group with $93.6 billion assets under management — has vocalized its bullishness on tokenization and blockchain-enabled wrappers over the last two years.&nbsp;&nbsp;



WisdomTree had <a href="https://blockworks.co/news/wisdomtree-launching-crypto-app">first revealed in January 2022</a> its intention to launch the “blockchain-native” mobile app, called WisdomTree Prime. The app went live in 21 states Wednesday.&nbsp;&nbsp;&nbsp;



In addition to tokenized gold, users of the app can buy and sell bitcoin and ether, as well nine WisdomTree digital funds. The company’s in-house transfer agent keeps a secondary record of investor ownership of the digital funds’ shares on the Stellar or Ethereum blockchains.&nbsp;



Every dollar, ounce of gold or unit of blockchain is based on tokenization technology and moving value around on a blockchain, said Jason Guthrie, WisdomTree’s head of digital asset product.



Behind the app’s gold-trading mechanism, for example, WisdomTree is utilizing “a little private corner” of the Stellar decentralized exchange (DEX), using tokens issued for the liquidity of the firm’s end clients. By using a DEX, it offers near-instant settlement.&nbsp;



“The idea really being that we get a familiar experience and lay it on top of this new technology innovation for storing and moving value around to try to smooth the edges off that experience today,” Guthrie told Blockworks.&nbsp;&nbsp;



By having dollars, gold, crypto and funds on a common infrastructure, WisdomTree’s hope is to “de-silo the investing and financial experience,” the executive noted.



Though the firm could choose to add exposures to the app, it sought to keep the app’s offerings focused on the “building blocks” of a cross-asset portfolio, Guthrie said.&nbsp;



“One of the big issues we see with a lot of the brokerage services today — definitely with a lot of the crypto providers — is the sheer number of things that exist on the platform and the fact that it’s an intimidating and confusing experience for your average person,” Guthrie said. “So we think there’s an opportunity to deliver something that is more focused.”



The launch signals the latest development of financial companies wading deeper into crypto, coming a month after <a href="https://blockworks.co/news/blackrock-clout-bitcoin-etf-approval">BlackRock filed with the SEC to launch a spot bitcoin ETF</a>. WisdomTree has tried to launch such a product previously, and <a href="https://blockworks.co/news/bitcoin-etf-invesco-wisdomtree">renewed its bid in June</a>.&nbsp;



But unlike BlackRock’s surprise ETF filing, WisdomTree Prime was talked about for about 18 months.&nbsp;



<a href="https://blockworks.co/news/wisdomtree-set-to-launch-fund-with-real-world-focus">Regulators approved WisdomTree’s Short-Term Treasury Digital Fund</a> (WTSY) last year. Executives on various company earnings calls have said that <a href="https://blockworks.co/news/wisdomtree-triples-down-on-future-blockchain-focus">blockchain-enabled digital wrappers are the future of asset management</a>.



“Regardless of how different consumers use it…by being first in tokenizing the underlying exposures and by being native to the blockchain in our design, WisdomTree will deliver unique and better functionality,” <a href="https://blockworks.co/news/wisdomtree-ceo-we-will-be-first-to-bring-passive-investing-to-the-blockchain">CEO Jonathan Steinberg said in April 2022</a>. “Nothing can potentially scale faster than a successful mobile app.”



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‘Blockchain-enabled’ WisdomTree consumer app goes live in 21 states

<div id="highlights-block_635c075561fb9" class="highlights">
 <ul>
 <li>“It’s a mistake to confuse crypto, which is a use case for the blockchain…with the broader opportunity we&#8217;re pursuing,” WisdomTree COO says</li>
 <li>The firm gained approval last month for a fund that digitizes its share ownership record on the blockchain, and has filed for nine more</li>
 </ul>
 
</div>



WisdomTree executives went as far as to say blockchain-enabled digital wrappers are the future of asset management — while the ETF-focused fund group gets set to roll out its digital assets consumer app in the first quarter of 2023.



The company’s leaders on Friday doubled down on its shift to a focus on digital assets during WisdomTree’s earnings call, reiterating its goal to bring fixed income, equities and commodities into the digital world through blockchain-enabled funds and tokenized exposures.



“Crypto’s interesting, but the real opportunity is blockchain-enabled finance,” Chief Operating Officer Jarrett Lilien said during the call. “It’s a mistake to confuse crypto, which is a use case for the blockchain…with the broader opportunity we&#8217;re pursuing.”



CEO Jonathan Steinberg said that in addition to dropping “Investments” from its name, the company would change its ticker from WETF to WT.&nbsp;



Though the company has 78 ETFs trading in the US with roughly $52 billion in assets under management, according to ETF.com, the CEO said the adjustments were “a nod toward our natural evolution and history of innovation” as the company looks to expand.



The company’s assets under management dropped to about $71 billion in the third quarter — down 4.6% from the second quarter — due to market depreciation. It has since rebounded to nearly $75 billion, in part due to $1.8 billion in October net inflows.&nbsp;



Its cryptoassets under management rose slightly from $151 million, as of June 30, to $163 million at the end of the third quarter. Net flows in the segment, which totaled $41 million in 2022, as of Sept. 30, were flat last quarter.



The company posted adjusted earnings per share of $0.06, which was in line with estimates. WisdomTree’s stock price, which is down about 16% year to date, was down 1.5% on the day at 12:30 pm ET.&nbsp;



<h3 class="wp-block-heading">Blockchain-focused product development</h3>



Executives said during the call that the company’s <a href="https://cms.blockworks.co/wisdomtree-launching-crypto-app/" target="_blank" rel="noreferrer noopener">blockchain-native financial services mobile app</a>, WisdomTree Prime, is in beta testing and is on track for a national rollout by the end of the first quarter of 2023.



WisdomTree CEO Jonathan Steinberg said the company has so far spent roughly $20 million on its tokenization and WisdomTree Prime efforts. The company’s leaders declined to comment on the app’s number of beta users or transaction volumes so far.



The firm also gained SEC approval <a href="https://cms.blockworks.co/wisdomtree-set-to-launch-fund-with-real-world-focus/" target="_blank" rel="noreferrer noopener">to launch its Short-Term Treasury Digital Fund</a> last month — an offering that digitizes its fund share ownership record on the Ethereum or Stellar blockchains. Executives have said the fund is a first step toward bringing traditional financial assets into the digital ecosystem and allowing blockchain rails to improve investor experience, such as through near-instant settlement finality.



WisdomTree has filed for nine additional funds to be part of a blockchain-enabled fund suite that includes fixed income and equity strategies, executives revealed.&nbsp;



Such offerings are expected to only be available via WisdomTree Prime initially, according to Will Peck, the firm’s head of digital assets.&nbsp;



<h3 class="wp-block-heading">Journey to a US spot bitcoin ETF</h3>



WisdomTree’s proposed US spot bitcoin ETF was rejected by the SEC last month, a familiar outcome for all asset managers who have sought to bring such a product to market.&nbsp;



Grayscale Investments is <a href="https://cms.blockworks.co/grayscale-lawsuit-moves-forward-as-gbtc-discount-widens/" target="_blank" rel="noreferrer noopener">moving forward with suing the SEC</a> for denying the company’s proposal to convert its Bitcoin Trust (GBTC) to an ETF. 



Peck said Friday that the firm has no plans to join Grayscale’s lawsuit, adding WisdomTree would instead look to “work productively” with the SEC.&nbsp;



“We know that regulatory concerns take time to address, and appreciate the due diligence in doing so,” Peck previously told Blockworks. “We acknowledge that this is a slow-moving process, and we aren’t letting that stop us from innovating in other ways in the meantime.”&nbsp;



The company offers crypto ETPs, including a spot bitcoin product, in Europe.



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WisdomTree Triples Down on Future Blockchain Focus

<div id="highlights-block_628be970c94f4" class="highlights">
 <ul>
 <li>WisdomTree envisions its mobile app to be an alternative to JPMorgan or Charles Schwab accounts</li>
 <li>Asset manager aims to continue building diversified crypto products for institutional investors in Europe</li>
 </ul>
 
</div>



As WisdomTree gets set to launch <a href="https://www.googleadservices.com/pagead/aclk?sa=L&amp;ai=CMBXKkvGLYqT2K_nsj-8Pn4G3wA_kx5SYaovcqYa5D5X1kZTBLggAEAEguVRgyYb_h_Cj7BKgAenQ27AoyAEByAPYIKoEXk_QuQJDELS0mk9ko4jrzpCaVL0F1O0igdYsup_M-h7jlbUugCOsUTBkKJUtlDXgxusXwO-8VJNlDm_DUiKLZFttWJgvtpvInttmmYVFJwWA12WN9sjQL-Fmhx8cCJ7ABMeSrrzpA4AFkE6IBcWl_9g7oAZmgAfpiKyQA4gHAZAHAagHpr4bqAe5mrECqAfz0RuoB-7SG6gH_5yxAqgHytwbqAfYprECoAiv0qYEsAgB0ggMEAIghAEyAoJAOgEAmgkfaHR0cHM6Ly93d3cud2lzZG9tdHJlZXByaW1lLmNvbbEJoC5PRNQ1pIO5CaAuT0TUNaSD-AkBmAsBqgwCCAG4DAHoDAaCFBQIAhIQd2lzZG9tdHJlZSBwcmltZYgUAsgU6YK8qdzzvLpy0BUB-BYBgBcBkhcJEgcIARADGPIB&amp;ae=2&amp;ved=2ahUKEwjy_ez2vfb3AhWPlnIEHXG9ApoQ0Qx6BAgCEAE&amp;dct=1&amp;cid=CAASFORoEgcD0OzC5In3NNWXW-LyT3iO&amp;dblrd=1&amp;sival=AF15MECIGMVfVt9uzWR4E_Fuq5K19FziuP0jUNOncwmPaU6zthq4VJLKhqfN0RTa0ZUx--t8UpgwcdveNWoeUFaaXGBwUr1xYo6Yo2Yuve626kxUNNiG-v_06Dt7WpT-_7YXzRcr5BqN_k3l6KHoaBTQZFO04yCzYEzup74QW4yKqfWr0vH3uTwyXWRe8R8YMcbdc9LZ3BP2&amp;sig=AOD64_01UFM1BNlk__iP9WGTxSQNQiRVlg&amp;adurl=https://www.wisdomtreeprime.com%3Futm_source%3DGoogle%26utm_medium%3DPaid%26utm_campaign%3DBrandSearch%26utm_content%3D2" target="_blank" rel="noreferrer noopener">a mobile app</a> allowing users to hold tokenized assets, the company’s product head for digital assets said such an offering could serve as a catalyst for the finance sector to have its “internet moment.”



Jason Guthrie, who worked at Macquarie Group and Deutsche Bank before joining WisdomTree in 2017, told Blockworks during the <a href="https://cms.blockworks.co/events/permissionless-livestream/" target="_blank" rel="noreferrer noopener">Permissionless event</a> in Palm Beach last week that financial services companies have not yet dramatically changed their business models amid digitalization in the space.



“I don’t think financial services had its internet moment,” he said. “It’s not like it’s Facebook disturbing advertising or Netflix disturbing television. These were huge disruptive, revelatory uses of that technology, and finance hasn’t got it.”



Called WisdomTree Prime, the company’s upcoming offering — <a href="https://cms.blockworks.co/wisdomtree-launching-crypto-app/" target="_blank" rel="noreferrer noopener">first announced in January</a> — seeks to provide a traditional finance experience built on decentralized finance principles. The asset manager is looking to move the app into beta testing at the end of this quarter and roll it out nationally later this year.&nbsp;



The app will initially allow users to transfer tokenized assets such as dollars, gold, Treasurys, bitcoin and ether, Guthrie revealed. It then seeks to bring fixed income and equities by the second quarter of next year.&nbsp;



Transferring value through these assets would be nearly instant. The app would also offer customer support, such as private key recovery.



“We want to add these experiences that make [digital assets] usable in the real world,” he said.



The estimated 200 million people involved in crypto today will continue to drive innovation in the space, Guthrie added, but usability has been a barrier to entry for the larger market.



“I care about the two billion people that are going to come on next,” he said. “How can we get them to pick a service like WisdomTree Prime instead of their JPMorgan or Schwab brokerage account?”



<h3 class="wp-block-heading">Diversification will be key</h3>



WisdomTree is also seeking to continue building diversified crypto products for institutional investors in Europe. The company launched <a href="https://cms.blockworks.co/wisdomtree-unveils-3-new-crypto-etps-as-investors-seek-diversity/" target="_blank" rel="noreferrer noopener">Solana, Cardano and Polkadot ETPs</a> on various European exchanges in March.



Institutional adoption, while slow, has “a huge amount of potential,” Guthrie said, as many family offices, hedge funds, asset managers, private banks, pensions and endowments engage with the company about the space.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



“The biggest problem for institutional adoption is that those institutions need to be able to adequately explain what they’re putting the client money into,” Guthrie explained. “So you’re educating them on how to educate clients.”



Guthrie noted the parallels between crypto adoption and the adoption of ETFs about 15 years ago. The ETF wrapper was something institutions had to learn about and come to grips with as clients were already comfortable with mutual funds.&nbsp;



“It’s the same thing here,” he said. “We’ve got this brand new way of doing things — this time it’s an asset class — but you can see they’re trying to get their internal processes comfortable with how they will communicate it with clients.”



In terms of new products, WisdomTree is focused on three segments: DeFi, the metaverse and layer-1s that compete with Ethereum. It is also actively working on how to fuse innovations within the space into the products, such as passing along staking yields to investors.&nbsp;



“We all know diversification is the only free lunch in investing,” Guthrie said. “Those that can bring a thoughtful and risk-managed approach to that are going to be the ultimate winners, and that’s what we’re trying to do.”



As for non-diversified products, WisdomTree is also one of many asset managers that has filed for a spot bitcoin ETF. The company <a href="https://cms.blockworks.co/wisdomtree-amends-bitcoin-etf-application/" target="_blank" rel="noreferrer noopener">amended its application</a> for the fund in December — a week after the SEC rejected its proposal — and expects a decision in the coming months.&nbsp;



Guthrie said he does not expect the agency to approve a spot bitcoin ETF this year.



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