WisdomTree launches its first Blockchain-enabled fund

by · October 10, 2022

WisdomTree launches its first Blockchain-enabled fund

WisdomTree, an exchange-traded fund and exchange-traded product sponsor, has launched its first open-end fund with shareholdings that can be tokenized on blockchains.

The WisdomTree Short-Term Treasury Digital Fund (WTSY) tracks the Solactive one- to three-year Treasury index. WTSY is the first open-end fund with shareholdings that can be tokenized on either the star or ethereum blockchains according to WisdomTree. The fund operates on a blockchain, but does not invest in any cryptocurrencies.

Will Peck, WisdomTree

Will Peck, head of digital assets at WisdomTree, told Markets Media that the firm chose to provide passive exposure to US Treasuries as interest rates rise and the asset class is one of the fundamental building blocks of a portfolio.

“We have applied for additional funding,” Peck added. “We aim to be the leader in providing passive exposure on crypto building blocks.”

Known for being a pioneer in the ETF industry, WisdomTree launched its first ETFs in June 2006. Peck said ETFs have amassed trillions in assets and will continue to expand due to their liquidity, transparency and standardization, and also continue to take shares from equity funds.

“We asked ourselves what will be the impact on ETFs that ETFs had mutual funds,” he added. “The next frontier of innovation is blockchain and distributed ledger technology.”

Blockchains can provide near-instant settlement on a peer-to-peer basis and allow trading 24 hours a day, seven days a week and every day of the year, regardless of holidays. They also allow for nuclear settlements, where software verifies that assets can be exchanged in settlements, and the use of smart contracts to make financial transactions more rule-based and predictable.

Peck continued that the fund has taken about two and a half years to reach this stage. A number of years of research and development with technology and service providers and discussions with the US Securities and Exchange were required.

The fund is an open and registered product under the 1940 Act and is regulated as a traditional mutual fund. Therefore, the fund cannot support anonymous transactions available in the crypto sector.

Unlike a traditional mutual fund, a transfer agent – ​​Securrency Transfers, Inc. – keeps the primary record of share ownership for the fund in its own books and records, but also maintains a secondary record of the shares on either the star or ethereum blockchains. State Street is the fund manager and administrator.

Peck said Securrency Transfers is a blockchain infrastructure provider and very few other firms can maintain records both on-chain and in their own books and records. He said: “We believe that this secondary record allows WTSY to achieve some of the user experience and benefits that many have come to appreciate about crypto, but it will not meet the definition that many have of crypto assets.”

In addition, State Street is a long-standing custodian and also has its own digital asset and tokenization business.

Source: WisdomTree

An investor can buy or sell shares and keep track of the transaction in the supported blockchain wallet of their choice. WisdomTree is chain agnostic and will choose the best chain for each use case.

Peck continued that WisdomTree chose the two blockchains for this fund based on the scale required by the asset manager. In addition, ethereum is the second largest blockchain behind bitcoin and hosts many innovations.

“Stellar has low transaction fees, high throughput and provides good resolution for this use case,” said Peck.

The fund has no management fees or other ongoing expenses charged to a shareholder, as the asset management industry is highly competitive with some traditional mutual funds and ETFs already setting zero. management fee. However, WisdomTree affiliates expect to charge other fees, such as transaction facilitation fees.

WisdomTree Prime

Investors will be able to buy the fund on WisdomTree Prime, the firm’s digital wallet built on blockchain, which is currently in beta and will be rolled out to more users from the waiting list later this year.

Peck said in a blog that when CEO Jonathan Steinberg founded WisdomTree, he noted that, unlike traditional mutual funds, all an investor needed was a brokerage account to access ETFs.

“Today, all an investor needs is a smartphone to access digital assets,” he added. “We believe this type of fund can bring mainstream assets, such as US Treasuries, into the evolving digital ecosystem, with the potential to unlock future use cases for these assets and distribution opportunities.”

Source: WisdomTree

In May this year, WisdomTree Prime agreed to a partnership with custody technology platform Fireblocks. WisdomTree said the integration of Fireblocks’ multi-party computation (MPC) wallet technology is expected to provide users with an additional layer of security related to the management of their private keys for transactions in selected cryptoassets such as bitcoin or ether and tokenized versions of physical ones. assets such as gold

Peck said in a statement at the time: “As a first mover in seeking to bring passive investment strategies and other financial products and services to the blockchain, it is critical to partner with technology providers that will help WisdomTree provide a secure experience for our users. “

Jonathan Steinberg, Wisdomtree

Steinberg said at WisdomTree’s July 2022 earnings call that the rollout of digital assets remains on track.

“Our firm’s responsible DeFi approach to digital assets, our trusted brand and opportunities arising from ‘Crypto Winter’ have positioned us well for success in this space,” Steinberg added. “There is a massive runway for sustainable growth ahead of us, and I am confident in WisdomTree’s ability to execute going forward.”

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