Bitwise has officially submitted paperwork, specifically a prospectus filed on September 16th, for a novel exchange-traded fund (ETF). This ETF will concentrate on stablecoins and asset tokenization, operating under the established framework of a 40 Act fund. The company is aiming for a potential launch date around the Thanksgiving holiday.
The proposed investment fund is designed to mirror the Bitwise Stablecoin and Tokenization Index. It achieves this through a dual investment strategy, dividing its assets equally between companies and digital assets. The fund will target businesses and assets that are expected to significantly benefit from the increased adoption of stablecoins and the expansion of asset tokenization technologies.
The equity portion of the fund’s holdings, representing up to 50% of the total, will be invested in companies across five key sectors. These include entities that issue stablecoins, those that provide essential infrastructure, payment processing firms, exchanges specializing in tokenization, and retailers with a focus on stablecoin-related transactions.
Tiered restrictions
To manage risk and ensure diversification, companies are subject to a tiered system of investment limits based on their level of exposure to the stablecoin market. Tier 1 firms, which derive a substantial portion of their business from stablecoins, will have their investment capped at 15%. Tier 2 companies, with a material but less dominant exposure, face an 8% investment limit. Finally, Tier 3 entities, with limited involvement in stablecoins, are restricted to a maximum of 3% of the fund’s holdings.
The fund’s investment strategy involves selecting the top 20 companies from the Tier 1 and Tier 2 categories. If necessary, to further diversify, up to 10 companies from Tier 3 may also be included. The crypto asset side of the fund focuses on exchange-traded products that offer exposure to the underlying infrastructure of blockchain technology. These assets are required to represent at least 1% of the market share in either stablecoins or tokenization.
The fund also allocates 5% of its assets to oracle tokens, which serve as vital bridges connecting blockchains to external data systems. The largest holding in this category will be capped at 22.5% of the index’s total value. The fund will undergo rebalancing on a quarterly basis, with a primary focus on investments in information technology companies.
The initial regulatory filing does not include details regarding management fees. As of September 16th, Bitwise managed a substantial $15 billion in cryptocurrency assets spread across 30 different investment products, including spot Bitcoin and Ethereum ETFs.
Fast-tracking approval through the 40 Act
Eric Balchunas, a senior ETF analyst at Bloomberg, pointed out that the prospectus was filed using the guidelines of the Investment Company Act of 1940.
Filings under the 40 Act typically benefit from shorter regulatory review times, potentially enabling product launches in a matter of months rather than years. This accelerated process is what makes Balchunas’ prediction of a swift approval seem reasonable.
The structure mirrors similar filings observed from REX-Osprey, exemplified by their planned Dogecoin and XRP ETFs anticipated to debut this week. This approach aligns with similar product offerings focusing on TRUMP, BONK, and Bitcoin.
This filing showcases the increasing efforts of companies to capitalize on the expanding institutional interest in the tokenization of real-world assets, an area that includes stablecoins, which have recently achieved a circulating supply of $287 billion.