Blink and Miss: Blockchain ETF Pair Launches on Nasdaq, NYSE

Bitcoin ETF
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The US SEC urged the issuers behind two exchange-traded funds to refrain from using “blockchain” in their names shortly before the launch dates. Prior to the ETFs being unveiled, regulators asked that the issuers, Amplify Investments and Reality Shares Inc., make their debut sans blockchain in their names, despite the fact that both ETFs have exposure to blockchain-driven companies. It wasn’t an order, reports suggest, but the companies complied anyway, perhaps in fear of regulators scrapping the funds altogether.

Investors can still detect a hint of blockchain in the symbols, evidenced by the Amplify Transformational Data Sharing ETF (BLOK) and Reality Shares Nasdaq NexGen Economy ETF (BLCN). If things had gone the way the companies intended, investors would be choosing between the Amplify Blockchain Leaders ETF and the Reality Shares Nasdaq Blockchain Economy ETF instead of the more generic names the issuers went with.

While the SEC has thus far pushed backed against any bitcoin ETF listings, including the version offered by the Winklevoss twins last year, blocking blockchain takes it a step further. As reports suggest, the move is likely an attempt to prevent a frenzy in the NAV of the funds similar to the response listed companies, such as Long Blockchain’s 200%+ advance, have triggered.

Nonetheless, blockchain — the underpinning technology for bitcoin and other cryptocurrencies — is precisely what investors are going to get with these funds, and regulators may be doing investors more of a disservice by favoring a disguise. It’s not as though both companies don’t outline the possible risks associated with blockchain in their SEC filings — both companies in their November 2017 SEC filings do. By hiding their blockchain association, regulators are either delaying the inevitable or are in denial.

Meanwhile, so far in 2018, the SEC crushed the plans of a dozen cryptocurrencies ETFs as well as a pair of mutual funds, according to reports. Regulators pointed to the risks associated with combining the popular ETF structure with digital coins as well as volatility inherent in cryptocurrency prices as a hurdle to valuing funds.

BLOK and BLCN ETFs

BLOK only just started trading but it has an NAV of $20. The ETF, according to the fund description, is comprised of “global companies at the forefront of blockchain-based technology.” The fund is actively managed, rather than tracking an underlying index, and contains securities including Taiwain Semi, Digital Garage, Nvidia, Square, IBM and others.

Index-tracking BLCN, meanwhile, is bullish on distributed ledger tech and is invested in dozen of “blockchain-related companies,” including the likes of Overstock.com, chipmaker Intel, China’s Hive BlckChn Tech, among others. The index that BCLN tracks has generated returns of 5% year-to-date, according to Bloomberg.

The fees tied to the blockchain ETFs are 70 bps and 68 bps for Amplify and Reality, respectively, with the higher fee for Amplify reflecting the actively managed status.

Meanwhile, the Fort Worth office of the SEC appears engaged with the blockchain, having tweeted in recent days: “We’re contemplating adding “Blockchain” to our name so we’ll increase our followers by 70,000 percent.”

Featured image from Shutterstock.

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Gerelyn is a fintech and cryptocurrency journalist who started her career writing about traditional finance/Wall Street. She has been reporting on financial services for the past 15-plus years. In full disclosure, she holds bitcoin (BTC).