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Asset management firm VanEck is making strides in the crypto investment space by filing to launch its “On-chain Economy” Exchange-Traded Fund (ETF), targeting the burgeoning digital asset market.
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Unlike many crypto ETFs, this fund will focus on companies involved in cryptocurrencies without holding any digital currencies directly, which sets it apart in an increasingly volatile market.
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“The Fund does not invest in digital assets or commodities directly,” stated VanEck in its official filing, emphasizing its strategy to leverage traditional assets and companies linked to the crypto ecosystem.
VanEck files for a new ETF that focuses on digital transformation companies and digital asset instruments, steering clear of direct crypto investments.
New VanEck ETF Plans to Avoid Direct Crypto Holdings
According to a January 15 filing, the fund will allocate at least 80% of its net assets to “Digital Transformation Companies” and “Digital Asset Instruments.” This strategic allocation enables investors to gain exposure to the crypto sector while mitigating the risks associated with direct cryptocurrency investments.
VanEck explained that digital transformation companies operate in areas such as crypto exchanges, payment gateways, crypto mining, or other infrastructures that support these activities. These firms not only facilitate crypto transactions but also include those that hold significant crypto assets or generate revenue from digital asset projects, enhancing the fund’s diversified investment portfolio.
Meanwhile, Digital Asset Instruments refer to financial products such as commodity futures, options, and other exchange-traded products that provide exposure to several cryptocurrencies without directly holding them.
“The Fund does not invest in digital assets or commodities directly,” the company emphasized in its filing, reaffirming its strategy to focus on associated companies rather than deal directly with the inherent risks of cryptocurrency ownership.
Nevertheless, the firm has filed for other crypto ETFs in recent months. In November, VanEck proposed to introduce Solana ETFs with the Chicago Board Options Exchange, evolving its offerings to align with market demands for varied crypto products. However, the firm faced setbacks when it shuttered its Ethereum futures ETF last September, attributed mainly to its performance falling behind Bitcoin-linked products.
VanEck’s head of digital assets research, Matthew Sigel, initially disclosed the new ETF plans in a now-deleted post on X (formerly Twitter). “Deleted a post on an ETF filing. Details coming soon,” Sigel remarked, indicating the intent to clarify further as the filing progresses.
The on-chain economy fund will focus on companies with substantial revenue linked to digital asset projects or those holding significant digital assets themselves. The selection of these companies will be grounded in a combination of fundamental analysis and market trend evaluations, ensuring a discerning investment strategy.
Another fund similar to VanEck’s on-chain economy fund is Bitwise’s “Bitcoin Standard Corporations ETF,” which exclusively invests in companies that maintain substantial Bitcoin reserves as part of their corporate finance strategy. This highlights a growing trend among investors looking to align their portfolios with the crypto ecosystem without direct exposure to its volatility.
Moreover, VanEck’s new fund intends to invest in digital asset instruments via a subsidiary in the Cayman Islands, a move designed to help the fund comply with U.S. tax regulations while still gaining necessary exposure to these instruments. This approach aligns with IRS regulations while enhancing the fund’s flexibility in investing.
“The Fund’s investment in the Subsidiary will generally not exceed 25% of the value of the Fund’s total assets at each quarter-end of the Fund’s fiscal year,” VanEck articulated in the filing, underlining the cautious yet strategic approach to its investment pathways.
The VanEck filing emerges as the SEC recently deferred its decision on Bitwise’s 10 Crypto Index ETF to March, signifying the regulatory body’s careful scrutiny of new cryptocurrency-related investment products. Such postponements reflect ongoing concerns over market integrity and investor protection within the evolving cryptocurrency landscape.
Conclusion
VanEck’s latest ETF filing highlights a deliberate strategy to engage with the lucrative crypto sector while steering clear of direct holdings. This approach seeks to mitigate risks associated with direct crypto investments, presenting a unique investment opportunity for those interested in the sector’s growth without the inherent volatility. As regulatory scrutiny continues, the fund’s outlined strategy may serve as a roadmap for future crypto investment vehicles.
