Firms that revealed plans for a climate-conscious spot bitcoin ETF in December are still working on getting that fund to the US market.
The product proposed by alternative investment firm 7RCC and Tidal Investments would seek a portfolio comprising 80% bitcoin and 20% carbon credit futures contracts “to provide exposure to bitcoin with an environmentally responsible approach,” according to a Dec. 18 filing.
7RCC would be the fund’s bitcoin adviser, while Tidal Investments is set to be its sponsor. The firms have not yet disclosed a fee for the fund.
The filing came just weeks ahead of the Securities and Exchange Commission approving spot bitcoin ETFs for the first time. In all, 10 spot bitcoin ETFs began trading in the US on Jan. 11. Those funds have since brought in combined net flows of roughly $1.5 billion, according to Bloomberg Intelligence data.
Though the planned 7RCC Spot Bitcoin and Carbon Credit Futures ETF was left out of the first wave of launches, the firms behind the proposal are moving forward with their plans.
“We’re a little bit of a different product anyway,” 7RCC CEO Rali Perduhova told Blockworks.
A 19b-4 document — a form set to be submitted by the New York Stock Exchange in this case — has not yet been filed for the fund. SEC approval of such a document is necessary before it would begin trading.
Addressing investor concerns
The proposed offering by 7RCC and Tidal Investments would give investors another bitcoin ETF option amid the ongoing conversations around the environmental impact of BTC mining.
While critics of BTC mining note the sector’s electricity usage, proponents have highlighted miners’ increased use of renewable or otherwise stranded energy, as well as helping balance power grids.
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“In no means is this targeted against bitcoin itself,” Perduhova said. “I think you can apply a similar investment strategy to any industry out there. You can do the same with gold mining, you can do the same with banking, you can do the same with anything.”
“But we know this has been a concern for certain investors and we wanted to address it,” she added.
Carbon credits represent the reduction or removal of greenhouse gas emissions that compensate for carbon emitted elsewhere. Carbon credit futures contracts physically deliver these carbon credits.
The 7RCC fund would seek to reflect the daily changes of the price in bitcoin and the value of carbon credit futures contracts as represented by the Vinter Bitcoin Carbon Credits Index.
The index’s carbon credit futures are linked to the value of emissions allowances issued under the European Union Emissions Trading System, the California Carbon Allowance, and the Regional Greenhouse Gas Initiative. The fund would gain exposure to the carbon credit futures portion of the index via swap agreements.
Bloomberg Intelligence data indicates that global assets conscious of ESG — environmental, social and governance factors — are on track to hit $53 trillion by 2025.
Perduhova said climate conversations on the government level have remained prevalent at events like the recent World Economic Forum in Davos, Switzerland.
“When you have governments involved in that, there is a lot of pressure coming from the top, and a lot of investors need to think along those lines going forward,” Perduhova said.
Neena Mishra, director of ETF research at Zacks Investment Research, told Blockworks in December that she doubted the carbon credit futures twist in this fund would entice investors. But Nate Geraci, president of The ETF Store, argued the proposed fund could ultimately “carve out a unique niche” in the bitcoin ETF category.
Timeline of launch?
It remains unclear exactly when the proposed 7RCC Spot Bitcoin and Carbon Credit Futures ETF could launch. After the New York Stock Exchange submits a 19b-4 for the proposed fund, the SEC would publish the proposal into the federal register.
From the date it hits the federal register, the regulator has 240 days before it would ultimately have to rule on the planned product.
Perduhova declined to comment on the possible launch timeline given that the SEC is actively reviewing the plans.
However, she noted: “We’re not proposing anything much different on the bitcoin side than anybody else that got approved.”
