Amid market woes, VanEck files Bitcoin 'mutual fund' with SEC

Exchange-traded fund (ETF) and mutual fund provider VanEck has applied to set up a new Bitcoin fund in the United States, according to a filing with the U.S. Securities and Exchange Commission (SEC).

The new financial vehicle, called the Bitcoin Strategy Fund, will invest in bitcoin "futures" and other publicly traded financial products that provide exposure to bitcoin. It will not directly hold or invest in bitcoin, which resolves a key legal issue (in terms of security and custody).

A futures contract is a financial contract whose value depends on or is derived from an underlying reference asset (in this case, Bitcoin). These can be physically settled (i.e. Bitcoin) or cash settled (i.e. fiat currency).

VanEck noted in the filing that the fund will invest in futures contracts only in cash-settled bitcoin futures traded on commodity exchanges registered with the U.S. Commodity Futures Trading Commission (CFTC). All investments will be made through a wholly owned subsidiary organized under the laws of the Cayman Islands.

“The subsidiary has the same investment objective as the Fund and will be subject to the same general investment policies and restrictions, but unlike the Fund, it may invest in bitcoin futures without restriction,” the filing reads.

In addition to its bitcoin-related investments, VanEck expects to hold a significant amount of cash and fixed-income investments designed to provide liquidity and guarantee the use of bitcoin futures.

The application is the latest in a long list of applications for a bitcoin ETF that the New York-based company is eager to obtain. VanEck has applied for a bitcoin ETF several times over the past few years, but all of them were rejected, and the SEC did not provide specific answers as to why.

Still, the company, founded in 1955, appears to be insisting on launching bitcoin-related products in the U.S., where the closest thing to an institution-ready, regulated bitcoin vehicle is the Grayscale Bitcoin Trust (GBTC).

After all, the Bitcoin ETF has proven to be a huge success in neighboring Canada, where the Purpose Bitcoin ETF, code BTCC, is issued by Canadian asset management company Purpose Investments. The product was launched last year and saw a staggering $165 million in trading on the first day.

It is worth noting that there have been several cryptocurrency tracking products in Europe that function similarly to ETFs, but Purpose Investments said in a statement that BTCC can directly invest in physical or digital Bitcoin and is the first true Bitcoin ETF. As of now, Purpose's ETF products hold more than $672 million worth of Bitcoin. Obviously, VanEck also wants a piece of the pie.

“There’s a lot of competition in every category, but it’s really a zero-sum game. Maybe one big winner, a couple of close second-place guys, and then the other 90% go out of business.”

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