U.S. crypto investors have been waiting for what seems like forever for a Bitcoin ETF, but the Securities and Exchange Commission keeps scowling at their proposals.
However, there’s another innovative exchange-traded fund (ETF) proposal sitting on the SEC’s desk, and while it engages solely with traditional markets, it’s nevertheless based on a scheme that observers must admit is a naked marketing ploy.
In the works is what’s supposed to be a low-cost ETF that not only slashes fees to the bone but actually pays investors to purchase shares.
If the SEC green lights this fund, Bitcoin proponents would rightfully be ticked off at the dinosaurs at the regulatory agency.
Called the Salt Low truBeta US Market ETF, the fund is being touted as a first-of-its-kind. It would be the first-ever negative fee ETF.
The fund is trying to initially raise $100 million. To reach that goal, it is offering to pay investors to put money in it, so for the first $100 million brought into the fund, Salt won’t charge anything and will instead add 0.05% to initial investments.
For every $10,000 a person invests, they get about $5 back, which amounts to five basis points.
The fund filed its application last week and is pending SEC approval.
The unconventional setup is getting plenty of attention. For example, Tom Lydon, editor, and proprietor of ETFTrends.com, told CNBC that it was “brilliant.”
“Is it a marketing ploy? Maybe, but it’s probably a great one because all the money is going into low-cost ETFs. Getting through the gatekeeper is key. When you look under the hood, it’s actually a great strategy. When you look at other low-volatility smart beta strategies, it really is good, and that will help get it attention.”
While it may seem like a money loser, in the end, it could be a hit. Lydon noted that the idea of paying investors could do the trick in attracting people who may not be interested at first.
“I think you’re going to see more people try this, because if you can finance a launch that’s going to get you to $100 million, you’ve got a better chance of getting to $1 billion. The biggest challenge is getting to that first $100 million.”
The reason meeting that $100 million goal is important is because it will allow the ETF to be available on more platforms, including those operated by Morgan Stanley and Merrill Lynch.
In the meantime, the number of Bitcoin ETF applications are stacking up at the SEC. Bitwise Asset Management, a San Francisco crypto investment firm, is the latest.
Others include VanEck, which refiled its application after yanking it during the government shutdown.
The regulator has been skittish about previous Bitcoin ETF proposals because of fears that there were not enough investor protections in place.
That’s understandable, but the thought that the SEC would then approve a fund whose main selling point – that it is a “negative-fee ETF” – is a naked marketing ploy is not.
To be clear, Salt’s ETF targets low-volatility stocks. Bitcoin clearly is highly volatile, which has been a hurdle to regulatory approval.
Still, backers hope that the groundswell of support for a Bitcoin ETF could be a catalyst for the SEC to approve one soon – even if it does charge fees.
Last modified: March 4, 2021 4:07 PM