According to a Feb. 9 announcement, the crypto lender launched the BlockFi Bitcoin Trust as an investment vehicle for investors seeking get in on the world’s first crypto asset, Bitcoin, without actually buying any bitcoins.
The company is clearly attempting to take on Grayscale’s GBTC—the largest bitcoin trust on the market—and its 2% annual fee by setting its own management fee at 1.75%.
“The entry of the Trust into the market will provide investors with an alternative, more cost-effective entry point to the crypto market compared with similar existing products,” the release noted.
“Given the level of institutional activity in recent months and demand for new, professional-grade investment vehicles, the timing of BlockFi Bitcoin Trust is ideal,” said BlockFi founder and CEO Zac Prince, “As we work to broaden the availability of this vehicle to retail brokerages, we expect this product will facilitate greater investments in digital assets.”
BlockFi also took a series of steps likely to reassure hesitant corporate investors. Other than index and pricing data provider Coin Metrics, all of the firms BlockFi is working with to support its trust are as deep in the mainstream financial services industry as it gets.
Fidelity Digital Assets, part of the mainstream multinational financial services firm, will provide custody, which BlockFi vice president for institutional services Yevgeniy Feldman said “will help give shareholders peace-of-mind in the security of their investments.”
It’s not the first time the two firms have worked together. In December, BlockFi and Fidelity Digital Assets announced a partnership allowing the lending platform’s institutional clients to keep bitcoin pledged as loan collateral on BlockFi in Fidelity’s custody.
Beyond Fidelity, the white shoe law firm Davis Polk & Wardwell is legal counsel. And, financial statements will be audited by Grant Thornton, the seventh-largest accounting firm in the world, which provides auditing services for leading U.S. exchange Coinbase.
“We believe a trust structure for this product is beneficial for investors and will play an important role in improving access in this nascent market,” Feldman said. “The BlockFi Bitcoin Trust can more easily meet rapidly growing demands from the public to invest in digital assets.”
BlockFi argued that investment trusts “are among the most popular methods for major institutions to invest in” bitcoin. Just yesterday, the Miller Opportunity Trust—a hedge fund that was worth $2.25 billion at the end of 2020—announced that it plans to invest up to 15% of its funds in the Grayscale Bitcoin Trust.
Shares of BlockFi’s bitcoin trust will be distributed via private placements and its investment objective will be to reflect the value of the Bitcoin held in the trust, minus its expenses and other liabilities. Shares of the trust will be available to institutions around the globe and qualified investors. The firm plans to expand its availability to include accredited individual investors from the United States, though no time frame was given.
Initial subscribers to the trust are expected to include BlockFi and institutional investors who used bitcoin to subscribe. After the initial lockup period expires, those shares may be sold on secondary investment markets through brokerage platforms. The trust will be managed by the crypto lender’s subsidiary BlockFi Management.