The cryptocurrency space has been looking forward to approval for a Bitcoin ETF.
Experts believe that even one Bitcoin ETF approved by the SEC will go a long way in earning investors’ confidence and ensuring the overall growth of the crypto industry. The SEC has however been reluctant about approving any of the many applications filed before it for a Bitcoin ETF.
The latest of these filings is an application for a digital Bitcoin ETF built on Algorand. The application was filed by Digital Funds LLC, a company based in Florida. The application titled “The Digital Funds S&P 500® Bitcoin 75/25 Index ETF” was filed on 12 April 2022.
The ETF is proposing a 75% investment of its asset “in large U.S. companies that comprise the S&P 500 Index”. The remaining 25% is to be invested in Bitcoin futures contracts.
It is worthy of note that the shares of this ETF are tokenized and recorded on the Algorand blockchain. According to the details of the application, the shares will be available to buy, sell or transfer on Algorand in a peer-to-peer manner like buying and selling cryptocurrencies.
Higher chance of approval
The proposed digital Bitcoin ETF is a futures ETF, which does not fit the description of a traditional Bitcoin ETF. Futures ETFs deal with Bitcoin futures contracts, which are “cash-settled contracts traded on commodity exchanges registered with the Commodity Futures Trading Commission.”
On the plus side, the fact that this is a futures ETF gives it a much higher chance of getting approved despite the fact that it is the latest of all the applications. Indeed, a few other futures ETFs have been approved for Bitcoin in the past, the latest of which was the Teucrium Bitcoin ETF, making a total of four approved Bitcoin futures ETF.
Making ETFs easier to use
Apart from the fact that this is a digital ETF, it is also an EtF that is very unique as equity trading is not done peer-to-peer traditionally. Algorand’s instant finality feature however makes it possible by conferring the blockchain’s permission less liquidity on the tokenized shares in addition to eliminating middlemen, which in turn removes counterparty risks.
If approved, the ETF will use Algorand’s blockchain to ensure transparency and prevent fraud, which will help mainstream investors be more confident in using it. This however does not eliminate the need for a Bitcoin spot ETF which the industry will still pursue in spite of this innovative project.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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