Hashdex Takes on SEC with New Bitcoin ETF Strategy

In a bold move, digital asset management firm Hashdex has recently submitted a 19b-4 filing to the NYSE, revealing a major transformation. The company is shifting gears, pivoting from its DeFi ETF to an all-in Bitcoin ETF, signaling a significant strategic change. Notably, this transition is distinct from the approach taken through Coinbase’s Supervisory Sharing Agreement (SSA).

Let’s explore.

Farewell DeFi, Hello Hashdex!

Hashdex has taken a dramatic step in rebranding its offering. The DeFi ETF has been completely replaced, making way for the newly named Hashdex Bitcoin ETF. This renaming accompanies a fundamental shift in Hashdex’s approach, now directly holding spot bitcoin in its portfolio.

Hashdex’s choice of partnership speaks volumes. Rather than relying on Coinbase’s SSA, which has historically underpinned several proposed spot bitcoin ETFs, Hashdex has opted to partner with the CME Market. The company’s strategy involves acquiring spot BTC through the CME Market’s Exchange for Physical (EFP) transactions.

The Inside Story of EFPs

EFPs are a specific type of Exchange for Related Position (EFRP) transaction. These are special financial instruments that allow investors to seamlessly switch between futures and ETFs or baskets of stocks in the underlying index—without exposure to intraday market fluctuations. Essentially, Hashdex is aiming to swap futures for actual bitcoin.

A notable aspect of Hashdex’s filing is its consistent reference to Coinbase as an “unregulated” entity. This stance underscores Hashdex’s clear decision to steer clear of any involvement with “unregulated bitcoin spot exchanges.” This strategic choice, while competitive, might offer a distinctive approach to appease regulators.

SEC’s Regulatory Maze

Hashdex’s strategy to not rely on Coinbase’s SSA might offer a unique path to pacify regulators. The SEC has previously stated that the CME’s bitcoin futures market is a “regulated market of significant size,” which could potentially alleviate some of their concerns around market surveillance and manipulation.

Unlike major players such as BlackRock, Hashdex is taking a different route. While others have relied on surveillance-sharing agreements to satisfy the SEC, Hashdex is boldly pursuing an alternate path. This move could be seen as either an ingenious way to circumvent regulatory hurdles or a source of new challenges.

The Wait Continues

The countdown begins as the SEC acknowledges Hashdex’s filing and posts it to the federal register. A 45-day window opens for the SEC to make its initial decision, with the possibility of extending this period to a maximum of 240 days. All eyes are on how regulators will respond to this audacious move.

In the words of Nate Geraci, President of the ETF Store, ETF innovation never ceases to amaze. Hashdex’s move showcases the relentless ingenuity in the crypto asset management space, which Geraci likens to the “Silicon Valley of asset management.”

So what’s the bottom line? Hashdex is rewriting the rulebook and challenging convention. Presenting the SEC with a fresh solution, the company is setting a new standard. If approved, this move could mark a significant change in how ordinary Americans securely invest in Bitcoin. The stage is set for potential transformation.