Fidelity has made an application with the U.S. securities regulator to offer a Bitcoin exchange-traded fund (ETF), according to public filings. The Block was the first to report on the application.
The asset management firm lodged paperwork for the Wise Origin Bitcoin Trust, which would track the price of Bitcoin using data from predominantly U.S.-based exchanges: Coinbase, Gemini, ItBit, Kraken and Bitstamp.
"An increasingly wide range of investors seeking access to Bitcoin has underscored the need for a more diversified set of products offering exposure to digital assets,” a Fidelity spokesperson told Bloomberg.
Fidelity is perhaps the highest profile name to apply for a Bitcoin ETF this year. Five other contenders are vying to become the first U.S. Bitcoin ETF, including VanEck, First Advisors/Skybridge and NYDIG.
A Bitcoin ETF traded in U.S. markets is seen as a prized instrument that could unlock retail investor demand for Bitcoin. With an ETF, investors would gain indirect exposure to Bitcoin without buying and holding the cryptocurrency directly.
But the U.S. Securities and Exchange Commission (SEC) has denied every application since the Winklevoss twins made the first attempt in 2013. The regulator has cited the possibility of market manipulation in the nascent Bitcoin markets, and liquidity and custodial risks, as reasons for rejecting the applications.
As the U.S. has stalled on a Bitcoin ETF, Canada has approved two such funds, making them the first North American ETFs for the cryptocurrency. The Canadian funds surged on their market debuts.
Investors in the U.S. have typically turned to the Grayscale Bitcoin Trust, traded on smaller OTC markets, usually at a premium to the underlying Bitcoin price. While more costly than an ETF, the convenience of accessing the trust has outweighed the extra expenses. The GBTC premium has become a discount in recent weeks.
Fidelity's application will see Fidelity's cryptocurrency arm serve as custodian. Its reputation in custody, along with its use of mainly U.S.-based exchanges could bolster its bid.
The SEC's new chairperson, Gary Gensler, is also seen as a factor that could aid an eventual ETF approval. Gensler has deep knowledge of the cryptocurrency markets, having taught on the subject at MIT.
Fidelity already offers a Bitcoin fund called the Wise Origin Bitcoin Index Fund to the bank's high-net worth clients with a minimum investment of $100,000.