Use VBB to Overcome Regulatory Risk in Crypto

Federal regulations regarding cryptocurrencies appear to be taking a step further, with the Biden administration preparing to issue an executive order possibly next month outlining government strategy and seeking definitions of risk and opportunity from government agencies regarding cryptocurrencies, reports Bloomberg.

Issuance of Executive Order Will Put White House at Center of Crypto Regulation; as it stands, the various agencies all deal with space somewhat on a piecemeal basis, depending on the jurisdiction. The lack of regulation and regulatory framework for cryptocurrencies and the cryptosphere in the United States has created a sense of reluctance and frustration for investors in the space.

The executive order is meant to highlight the regulatory, economic and national security challenges created by cryptocurrencies and will supposedly require reports due from various agencies by the second half of the year. Topics of the report include illicit uses of digital tokens and coins, an assessment of the systemic impacts that digital assets could have, and potentially the possibility of a central bank digital currency.

Almost all cryptocurrencies remain undefined within the US regulatory framework, but bitcoin is one of the few that has been clearly defined by the SECOND. A SECOND The president in 2019 defined bitcoin as a commodity, not a security; the most popular cryptocurrency has never sought public funding to develop blockchain technology, and therefore does not pass the Howey test that the SECOND uses to define whether an asset is a security or not.

the SECOND is currently involved in a lawsuit against Ripple Labs and two of its executives who SECOND claims have never registered their cryptocurrency, XRP, or provided satisfactory grounds for exemption by not registering it. Ripple hits back and argues that their cryptocurrency is not a security and therefore does not fall under SECOND skills or requirements.

The outcome of this lawsuit will help better define the status of cryptocurrencies as a commodity or security, but until then it remains unclassified and hotly contested, opening the door to potential risk.

the Valkyrie Balance Sheet Opportunities ETFs (VBB) provides investors with exposure to companies that use bitcoin, one of the only regulator-defined cryptocurrencies in the United States, in one way or another on their balance sheets. The fund is actively managed and invests in companies that carry bitcoin in some way on their balance sheets, whether through investing, trading or other exposures such as through exchanges .

Valkyrie invests in companies that have both innovative balance sheets and the best total return potential, which takes into consideration standard measures such as price to earnings, price to book and growth ratios. To determine weighting, Valkyrie considers financial metrics in tandem with the percentage of blockchain a company has on its balance sheet.

Up to 10% of the fund can be invested in bitcoin miners, and it can also invest up to 20% in companies it believes will have an innovative track record within one to three years depending on current business. company and announcements. .

The fund may invest up to 15% of its net assets in preferred securities and convertible notes, and up to 10% in non-US securities. The fund may also invest up to 5% of its assets in securities of US common investment vehicles holding bitcoin.

Top holdings include MicroStrategy (MSTR) to 12.76% by weight, Tesla (TSLA) at 10.96% by weight, and Block (SQ) at 10.12% by weight.

VBB has an expense ratio of 0.75% and does not invest directly in bitcoin.

For more news, insights and strategy, visit the Crypto Channel.

Martin E. Berry