After in September, Bakkt’s physically-backed Bitcoin futures platform finally started its work, a lot of crypto believers wondered what is next. Well, there is something. The U.S. Securities and Exchange Commission (SEC) recently approved a new investment fund that will invest in Bitcoin futures contracts.
The registration statement filed by Stone Ridge Trust VI for the NYDIG Bitcoin Strategy Fund began with its work on Monday after the company, already in October filed Form N-2 with the SEC. Actually, the company amended N-2 two times. The first time was on October 16, and later on November 26.
This kind of form is usually needed by so-called closed-end management investment firms in order for them to legally register and offer their shares under the Securities Act. Stone Ridge Asset Management Llc is announced to be the fund’s investment adviser. Meanwhile, the company managed to raise around $15 billion of assets from August 30.
The NYDIG Bitcoin Strategy Fund said it “is a non-diversified, closed-end management investment company that continuously offers its shares,” the filing details, adding:
“The fund pursues its investment objective primarily by investing in Bitcoin futures contracts … The only Bitcoin futures in which the fund will invest are cash-settled bitcoin futures traded on commodity exchanges registered with the CFTC.”
As per the filing, the fund does not intend to invest in Bitcoin or any other cryptocurrency directly.
The price is $10 per share and only institutional investors and their clients are allowed to invest in the fund. CME is, at this time, the only CFTC-approved exchange that offers cash-settled Bitcoin futures contracts. However, the intention of this fund is not to act as a Bitcoin exchange-traded fund (ETF).
Last week, during the 2019 ICI Securities Law Developments Conference, Director of the SEC’s Division of Investment Management, Dalia Blass, spoke of cryptocurrency ETFs and the SEC’s determination to give consent to a fund that focused on investing in Bitcoin futures contracts.
“We welcome and value constructive industry engagement regarding new products and novel investment strategies. A prime example of such engagement involves registered funds seeking to invest substantially in digital assets and related investments.”
Blass also added she provided a public letter last year arguing the funds have to discuss issues presented by such investments.
“As a result of this engagement, we are at the point that a registered closed-end interval fund with a Bitcoin futures strategy is preparing to launch. To reach this point, the fund first responded to each of the issues identified in the staff letter.”
SEC Commissioner Hester Peirce, known on Twitter space as the “Crypto Mom”, tweeted of the latest agency’s move as of a “bit of progress.”
A bit of progress: “we are at the point that a registered closed-end interval fund with a bitcoin futures strategy is preparing to launch.” –Dalia Blass https://t.co/WV1M18f2Ug
— Hester Peirce (@HesterPeirce) December 4, 2019
Blass went on to explain that SEC expects “to generally value its Bitcoin futures holdings at daily settlement prices reflected on a CFTC-registered futures exchange, consistent with the principles of the Investment Company Act of 1940 and U.S. GAAP.”
She also added that because the fund is investing in cash-settled Bitcoin futures, it “will not face the challenges presented by direct holdings of digital assets.” Also, let’s not forget that this, after all, is a closed-end interval fund. That means the fund does not offer “daily redemptions and will not be subject to potentially large, unexpected liquidity demands over short periods.”
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