New ESG-Oriented Bitcoin ETF Proposed, Combining Crypto & Carbon Credits
Crypto asset manager 7RCC has submitted an application to the Securities and Exchange Commission (SEC) for a unique spot Bitcoin exchange-traded fund (ETF) that blends digital assets with carbon credits. This innovative approach aims to cater to environmental, social, and governance (ESG) investors while addressing concerns about Bitcoin's carbon footprint.
The fund’s investment objective is to "reflect the daily changes of the price in bitcoin and the value of carbon credit futures contracts,” and is “designed to track the performance of investing in a portfolio comprised of 80% of bitcoin and 20% Carbon Credit Futures,” according to the S-1 statement filed on Monday.
As the SEC gears up to potentially approve the first wave of spot Bitcoin ETFs in January 2024, 7RCC's proposal stands out as a novel endeavour that could attract a specific breed of institutional investors looking for ESG-compliant opportunities. Bitcoin mining's energy-intensive nature has long been criticized for its environmental impact, and this new offering seeks to address this concern.
ESG Investing in the Spotlight
ESG investing, centred on environmental, social, and governance factors, has gained immense traction in recent years. It empowers investors to adopt a socially responsible approach by targeting assets that align with principles such as climate change mitigation and diversity. While it's not without its critics, including some Republican lawmakers, a 2022 Harvard survey revealed that 81% of U.S. institutional investors plan to increase their allocations to ESG products over the next two years. It's predicted that assets under management in ESG-focused investments could double to $10.5 trillion by 2026.
While the SEC's potential approval of spot Bitcoin ETFs has generated significant excitement, it has also raised concerns among environmentally-conscious investors. Bitcoin's mining process is power-hungry and contributes to a sizable carbon footprint. This has, until now, deterred ESG-oriented investors from participating in cryptocurrency-related products.
7RCC's Innovative Solution
7RCC's proposed ETF, tentatively named BTCK, proposes an ingenious approach to bridge the gap between Bitcoin and ESG considerations. The ETF would consist of 80% spot Bitcoin and 20% carbon credit futures, creating a carbon-neutral trading strategy. This innovative mix aims to appeal to ESG-focused institutional investors.
Gemini will serve as the custodian and financial platform Tidal will assist in white-labeling the ETF. As of October 31, 2023, Tidal manages over $8.5 billion and partners with more than 54 ETF issuers that have launched a combined total 118 ETFs.
As Bitcoin continues to evolve, the intersection of cryptocurrency and ESG investing becomes increasingly relevant. It remains to be seen how the SEC will evaluate this unique ETF in the context of the broader cryptocurrency landscape.