Crypto Players Keep Pushing for ETF; This Time It’s for Blockchain

Reality Shares and Amplify ETFs become the latest to submit filings to SEC to create Blockchain-related ETFs.

The effort to bring to fruition the cryptocurrency’s space first ETF continues.

Two players recently filed papers with the U.S. Securities and Exchange Commission to start such a fund. Instead of these ETF ideas being related to Bitcoin, they are specific to Blockchain.

Reality Shares and Amplify ETFs submitted filings to the SEC last week. Reality Shares wants to start the Reality Shares NASDAQ Blockchain Economy ETF. Amplify wants to create the Amplify Blockchain Leaders ETF.

Keeping it real

Reality shares is a privately owned investment management firm.

According to its SEC filings, Reality Shares seeks long-term growth by tracking the investment returns of the Reality Shares NASDAQ Blockchain Economy Index.

The Index is designed to measure the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing Blockchain technology for their proprietary use or for use by others. 

The filing goes on to explain that these Blockchain companies are committing material resources “to further the use and deployment of Blockchain technology.” Uses include:

  • streamlining the distribution and verification of cross-border payments
  • more efficiently storing and securing cloud-based digital data
  • facilitating trusted transactions based on data security and privacy

What’s in the basket?

The companies that make up the Reality Share index will be identified based on research and analysis conducted by the index providers. The Index universe is then narrowed to include only Blockchain companies that have market caps greater than $200 million. 

The remaining Blockchain companies are then ranked to determine the leading companies in the pact based on what is being called a Blockchain Score. This is a proprietary ranking system developed by the index providers that is designed to identify the companies that are expected to benefit the most from factors such as: 

  • increased economic profit
  • operational efficiencies or transformational business practices
  • the development of innovative products that adopt, deploy and commercialize Blockchain technology

The 50 to 100 leading Blockchain Companies with the highest Blockchain Scores™ are then selected as the Index constituents. Constituents are weighted in the Index based on their Blockchain Scores™, with Blockchain Companies having higher Blockchain Scores™ weighted more heavily. – Reality Shares SEC filing

Amped up

While Reality Shares will list its ETF shares on the NASDAQ, Amplify ETFs intends to list its shares on NYSE Arca. 

To make sure that the Blockchain companies it includes in its fund are legitimate Blockchain companies, Amplify has put several criteria points in place. As noted in its filing with the SEC, companies must be:

  • actively engaged in the proof-of-concept testing, and/or implementation of Blockchain technology
  • profiting from the demand for Blockchain-based applications, such as cryptocurrency and mining
  • directly investing in companies that are actively developing ways to use of Blockchain technology

Like Reality Share’s ETF criteria, Amplify requires that the security have a market cap of $200 million. 

The company’s CEO, said Christian Magoon, told MarketWatch:

 “We believe there’s a ‘pick and axe’ play here, where we’re not just looking to sell the gold, but also the equivalent of the mining equipment. Bitcoin is just one application for Blockchain, the best known one, but there will be all kinds of applications, not just cryptocurrencies. We think it is like the internet was 20 years ago.”

Road to Bitcoin ETF littered with non-starters

Efforts to create a Bitcoin ETF have sputtered on and off over the past five years or so. Efforts really gained attention when the Winklevoss twins actively pursued creating one. The brothers Tyler and Cameron set about trying to create a Bitcoin ETF, but their efforts were throttled by the SEC, which rejected their proposal earlier this year.

The ETF filings by Reality Shares and Amplify ETFs are admirable because they are based on Blockchain. 

Considering that Blockchain is quickly being indoctrinated into just about every sector due to its security and reliability, the SEC may see an ETF associated with it more favorably than it sees ETFs for Bitcoin.