Planned ETF Would Invest in Grayscale's GBTC to Sidestep SEC's Crypto Reluctance

Up to 15% of the fund would be invested in bitcoin, solely through the Grayscale Bitcoin Trust.

Mar 11, 2021 at 9:55 a.m. UTC

Updated Sep 14, 2021 at 12:24 p.m. UTC

A new exchange-traded fund (ETF) proposal seeks a way to allow institutional investors to get involved in the world of cryptocurrency even though the U.S. has so far blocked all attempts to list a bitcoin ETF.

According to a prospectus filed with the U.S. Securities and Exchange Commission (SEC) on Tuesday, the Simplify U.S. Equity PLUS Bitcoin ETF would invest in cryptocurrency indirectly via the Grayscale Bitcoin Trust (OTCQX: GBTC), as well as equity securities of U.S. companies.

Up to 15% of the fund, from New York-based Simplify Exchange Traded Funds, would be invested in bitcoin, solely through the $35 billion Grayscale Bitcoin Trust, with the remainder in equities.

If approved, the ETF would trade on the Nasdaq under the ticker "SPBC," and have a management fee of 0.5%. BNY Mellon would be the ETF's administrator, transfer agent, asset custodian and accountant.

In its investment strategy section, the Simplify prospectus states:

The Fund expects to gain exposure to cryptocurrencies indirectly by investing up to 15% of its total assets (measured at the time of investment) in a wholly-owned and controlled subsidiary, which is designed to enhance the ability of the Fund to obtain exposure to cryptocurrencies consistent with the limits of the U.S. federal tax law requirements applicable to regulated investment companies.

The Grayscale Bitcoin Trust is the world’s largest bitcoin fund, offering investors the opportunity to gain regulated exposure to the leading cryptocurrency without having to take direct control of assets.

The latest figures show Grayscale Investments – owned by CoinDesk's parent firm, Digital Currency Group – currently has $42.1 billion in net assets under management across all its cryptocurrency trusts and funds.

The SEC has yet to approve a bitcoin ETF, having shot down a host of hopefuls in recent years. Most recently, VanEck made another attempt to persuade the SEC that now is at last is the time, with a filing in December.

Canada, on the other hand, recently approved three bitcoin ETFs, all of which listed on the Toronto Stock Exchange.

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