Indirect Exposure To The Crypto Markets
Following in the footsteps of other large funds that have brought similar products to the market, Charles Schwab is set to launch its first crypto-related ETF. The Schwab Crypto Thematic ETF will track the firm’s new proprietary index, consisting of companies that enable the use of digital assets to buy or sell goods and assets and companies that are developing blockchain applications. The investment arm of the Charles Schwab Corporation, Schwab Asset Management, stated that the ETF would offer investors indirect exposure to the crypto space.
Not Investing In Cryptocurrency Or Digital Assets Directly
The firm’s prospectus, filed with the US Securities and Exchange Commission on Friday, stated that the new fund would not be investing in cryptocurrencies and digital assets directly. Instead, nearly 80% of the funds will be invested in securities, such as firms that already have a stake in crypto. According to the prospectus, the fund currently has 44% of its assets invested in software and 41% in the diversified financials sector.
The firm’s head of equity product management and innovation, David Botnet, stated,
“STCE can offer more targeted exposure to cryptocurrency-focused companies compared to blockchain technology ETFs, which may have significant exposure to multinational companies involved in blockchain (e.g., Amazon, IBM, Mastercard, and others). For investors who are interested in cryptocurrency exposures, there is a whole ecosystem to consider as more companies seek to derive revenue from crypto directly and indirectly.”
The Lowest Cost Crypto-Related ETF
The company also revealed that the fund would have an annual operating expense of 0.30%. This works out to around $3 per $1000, making it the lowest cost-related ETF available to investors. For context, Bitwise Crypto Industry Innovators ETF (BITQ) has annual fund operating expenses of 0.85%, while VanEck recently filed an application for a new spot Bitcoin ETF charges 0.50%. This is done to try and carve out an advantage for itself after being considerably late to the party.
For a considerable time, Schwab has been trailing behind its traditional competitor, Fidelity. In 2019, CEO Walt Bettinger was dismissive of crypto and called it extremely speculative. At the same time, Fidelity had just received a charter allowing it to operate its Fidelity Digital Assets Services as a Limited Liability Trust Company In New York State. At the start of 2022, Bettinger stated that he believes crypto is a void for his firm. However, on Fidelity’s side, the firm became the first company to allow employees to invest around 20% of their 401k in Bitcoin.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.