A proposed exchange-traded fund (ETF) would invest the majority of its capital into companies that have bitcoin on their balance sheets or are otherwise connected to the cryptocurrency.
Valkyrie Digital Assets, which has also filed a bitcoin ETF application, filed a Form N1-A for Valkyrie Innovative Balance Sheet ETF with the U.S. Securities and Exchange Commission on Friday in partnership with KKM Financial, which is acting as the investment advisor to the fund, and institutional asset manager SEI, which is acting as the distributor of the fund.
“The Fund … will invest principally in the securities of operating companies that have innovative balance sheets … [O]perating companies that directly or indirectly invest in, transact in or otherwise have exposure to bitcoin or operate in the bitcoin ecosystem,” Valkyrie wrote in the filing.
Valkyrie defined the Bitcoin ecosystem as the Bitcoin network and “bitcoin trading platforms, bitcoin miners, bitcoin custodians, digital wallet providers, companies that facilitate payments in bitcoin and companies that provide other technology, equipment or services to companies operating in the Bitcoin ecosystem.”
Similarly, last week JPMorgan Chase published a filing that detailed an incoming debt instrument that is linked to cryptocurrency-associated companies such as MicroStrategy, Square, Riot Blockchain and chipmaker Nvidia.
If the ETF proposal becomes an investment vehicle before the U.S. Securities and Exchange Commission approves a bitcoin ETF, it could capture the same kind of inflows that Canadian bitcoin ETFs have seen days after approval from the Ontario Securities Commission.
Earlier this year, analysts noted that MicroStrategy’s stock was being treated as a bitcoin ETF proxy because the stock rallied in tandem with bitcoin.
Investment vehicles that give exposure to companies buying bitcoin may help companies that aren’t allowed to add bitcoin to their own balance sheets, said Jeff Kilburg, CEO of KKM Financial.
“This is a very complicated, sophisticated approach for some of these multinational corporations that have policies and procedures that currently don’t include the ability to own cryptocurrency,” Kilburg said. “That’s where it gets really challenging to identify not just the existing companies [invested in bitcoin] but to find the companies who are looking to include this on their balance sheet.”
CORRECTED (March 12, 22:03 UTC): The CEO of KKM Financial is Jeff Kilburg, not Jeff Kilgore.