The “Onchain Economy ETF” aims to be traded using the ticker symbol NODE. Unlike investing directly in digital currencies, it offers exposure by investing in companies and funds associated with the digital asset marketplace or ecosystem.
Digital Transformation Companies
As per the initial prospectus submitted to the SEC on January 15, 2025, our ETF plans to invest at least 80% of its resources in “Digital Transformation Companies” and “Digital Asset Instruments.” This encompasses firms operating cryptocurrency exchanges, payment gateways for direct processing, and those involved in or supporting digital asset mining. Furthermore, the ETF will invest in software service providers, equipment manufacturers, and technological innovators within this field. Additionally, it will allocate funds to energy and data infrastructure companies essential for digital asset operations, as well as businesses that foster commerce using digital assets.
VanEck categorizes “Digital Transformation Companies” as entities involved in “digital asset projects” or holding a significant quantity of digital assets. The investment approach of this fund is expansive, including businesses offering technology, energy infrastructure, data center resources, and other services essential for digital asset management, along with companies that possess considerable digital assets.
The document mentions that “Digital Asset Instruments” encompass a variety of financial products, such as commodity futures contracts, exchange-traded commodities linked to instruments like options and future options contracts, swap agreements, and pooled investment vehicles like cryptocurrency ETFs (Exchange-Traded Funds) that provide exposure to digital assets.
Significantly, this ETF does not possess any digital currencies such as Bitcoin or other cryptocurrencies itself. Rather, it acquires exposure by investing in the companies and instruments related to these digital currencies. This seems to be a tactical move designed to circumvent regulatory obstacles that prevent investment firms from directly holding digital assets.
The document mentions that “this Investment Fund aims for long-term growth” and might involve frequent and active trading. It’s also noted that this Fund falls under the category of a non-diversified fund, which allows it to put a larger portion of its resources into investments from a single issuer.
The fund’s investments in a completely owned Cayman Islands subsidiary should typically not exceed 25% of the fund’s total asset value at the end of each fiscal quarter, and it aims to offer indirect investment exposure to Digital Asset Instruments while adhering to federal tax regulations limiting investment companies. Additionally, the filing acknowledges the significant volatility that comes with the targeted assets.
The document provides an overview of significant risks, particularly those related to ‘Digital Transformation Companies.’ It’s important to remember that this technology is still in its early stages and carries risks such as cryptographic keys used for digital asset transactions being vulnerable to theft, loss, or damage. Additionally, it mentions the potential for rival platforms and technologies to arise, and warns that a company’s value may not accurately represent its involvement with digital assets due to its other business activities.
Moreover, this investment fund carries risks associated with its holdings of Digital Asset Instruments. These risks encompass price volatility, limited investor protections compared to US registered funds, commodities, and derivatives linked to commodities, as well as futures contracts. The document mentions potential risks from certain futures contracts that might result in a loss in markets with contango conditions.
Although the submission provides a detailed summary about the potential fund’s functioning and potential risks, certain aspects like the management fee, particular investments, and the precise launch date for the public offering are yet to be finalized.
VanEck’s head of digital assets research, Matthew Sigel, shared on his social media platform that further information will be revealed soon.
According to the filing, the fund plans to generate and redeem shares through a combination of in-kind security transfers and cash transactions. Shares of the ETF will be bought and sold on an exchange, though its listing exchange is still undecided. Potential investors should be aware that share prices may differ from their actual net asset value (NAV). The SEC will now examine the prospectus for compliance with securities laws, and if it passes, trading of the fund could begin soon.
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2025-01-16 17:27