Ben Strack

<div id="highlights-block_626c15910dc19" class="highlights">
 <ul>
 <li>Firm is set to launch its blockchain-native financial services app, WisdomTree Prime, later this year</li>
 <li>CEO Jonathan Steinberg said having a mobile financial app will be “table stakes” in 2023</li>
 </ul>
 
</div>



WisdomTree will be the first asset manager to bring passive investing to the blockchain, the company’s CEO said, doubling down on past statements about the firm’s bullishness on the crypto space.&nbsp;



The fund group eclipsed $80 billion in assets under management for the first time this month, executives said during a Friday earnings call. It plans to roll out its blockchain-native financial services mobile app, <a href="https://cms.blockworks.co/wisdomtree-launching-crypto-app/" target="_blank" rel="noreferrer noopener">WisdomTree Prime</a>, later this year.



Jonathan Steinberg noted the importance of being a first-mover, noting Vanguard’s pioneering of passive investing within the mutual fund wrapper and BlackRock’s iShares creating the first comprehensive passive suite of ETFs.



Vanguard manages about $8 trillion in assets, and BlackRock, the world’s largest asset manager, has more than $2 trillion within its nearly 400 US ETFs alone.



Steinberg said that virtually all financial assets, through tokenization, will eventually come to the blockchain. WisdomTree Prime is set to allow users to save, spend and invest in cryptoassets, such as bitcoin and ether, blockchain-enabled funds and tokenized versions of physical assets such as gold.



Companies that don’t adapt to the changing financial services landscape could resemble newspaper groups that failed to harness the power of the internet, he added, or camera companies that were replaced by smartphones.



“There will be spectacular winners and many who get disrupted and disintermediated out,” the CEO explained. “It is easy to envision a world where many of today’s leading financial services companies look like yesterday’s newspaper groups.”



WisdomTree is set to launch the beta testing of its new app during the second quarter.&nbsp;



Steinberg said having a mobile financial app will be “table stakes” in 2023. He noted that some investors will likely use WisdomTree Prime as a neo-bank, while others will use it as a registered investment advisor (RIA) of sorts.&nbsp;



“Regardless of how different consumers use it…by being first in tokenizing the underlying exposures and by being native to the blockchain in our design, WisdomTree will deliver unique and better functionality,” he said. “Nothing can potentially scale faster than a successful mobile app.”&nbsp;



<h3 class="wp-block-heading">A glimpse at future products</h3>



Will Peck, WisdomTree’s head of digital assets, told Blockworks the company intends to launch more products in Europe, as well as enhance existing ones. He declined to comment on specifics.



WisdomTree <a href="https://cms.blockworks.co/wisdomtree-unveils-3-new-crypto-etps-as-investors-seek-diversity/" target="_blank" rel="noreferrer noopener">added Solana, Cardano and Polkadot ETPs</a> to various exchanges across the continent last month.



In the US, WisdomTree is one of many asset managers to file for a spot bitcoin ETF. The company <a href="https://cms.blockworks.co/wisdomtree-amends-bitcoin-etf-application/" target="_blank" rel="noreferrer noopener">amended its application</a> for the fund in December, a week after the SEC rejected its proposal.  



Industry executives remain unsure when the agency could approve a spot bitcoin ETF, though <a href="https://cms.blockworks.co/crypto-execs-read-the-tea-leaves-on-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">most believe</a> one won’t launch until 2023 at the earliest. 



The firm also <a href="https://www.sec.gov/Archives/edgar/data/1859001/000119312521136968/d156395dn1a.htm" target="_blank" rel="noreferrer noopener">filed</a> in April 2021 to launch a Digital Short-Term Treasury Fund, which would have a record of share ownership digitized on the blockchain. The following month it revealed plans to launch an Ethereum trust.



While the outlook for a bitcoin ETF in the US remains “muted,” Jarrett Lilien, WisdomTree president and COO, said during the Friday earnings call, <a href="https://cms.blockworks.co/wisdomtree-and-ritholtz-wealth-management-launch-crypto-index/" target="_blank" rel="noreferrer noopener">the firm launched</a> a separately managed account (SMA) strategy for the US wealth channel.



“Consider that there are $30 trillion in assets in the US wealth channel alone,” Lilien said. “So even a 1% allocation to crypto in just the US would yield a $300 billion market opportunity for crypto exposures, and the realistic opportunity to be multiples of that.”



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blockchain

WisdomTree CEO: We Will Be First to Bring Passive Investing to the Blockchain

<div id="highlights-block_61a4d39fa54f2" class="highlights">
 <ul>
 <li>Three new products begin trading today: WisdomTree Crypto Market (BLOC), WisdomTree Crypto Altcoins (WALT) and WisdomTree Crypto Mega Cap Equal Weight (MEGA) ETPs</li>
 <li>Appetite for diversified basket products increases as institutional investors look beyond just bitcoin and Ethereum, according to WisdomTree’s head of digital assets in Europe</li>
 </ul>
 
</div>



WisdomTree has added three new physically backed cryptocurrency basket exchange-traded products to its lineup of offerings in Europe. 



The firm listed the WisdomTree Crypto Market (BLOC), WisdomTree Crypto Altcoins (WALT) and WisdomTree Crypto Mega Cap Equal Weight (MEGA) ETPs on Tuesday on SIX, the Swiss stock exchange, and Börse Xetra in Germany. They can be sold across the European Union.&nbsp;



The ETPs allow investors to gain diversified exposure to crypto markets as well as participate in the potential growth of decentralized finance, payments, smart contracts and NFTs, said Jason Guthrie, WisdomTree’s head of digital assets in Europe.



The asset class has grown to about $2.6 trillion since its introduction a little over a decade ago, he added, and institutions have shown increased interest in crypto over the past year.



“Going from engagement on the topic to building the approach internally to actually executing on behalf of clients is a journey for institutions, and they understandably move slowly through that,” Guthrie told Blockworks.&nbsp;



<h3 class="wp-block-heading">Looking beyond BTC and ETH</h3>



The institutional interest has gone beyond just bitcoin and ether, the executive added, noting that a diversified investment approach rather than concentrated bets within the space provides a “stepping stone” for certain asset managers.



“[There’s] the narrative around the growth smart contract platforms and the idea that it’s not going to be a winner-takes-all technology, that there is a multichain future that focuses on interoperability and the building of the use cases in DeFi, NFTs, the metaverse,” Guthrie explained. “All of that is starting to resonate, and the pace of which they’re picking that up is increasing, so we think there&#8217;s an appetite for these sorts of diversified basket products.”



BLOC offers exposure to a diversified basket of crypto assets, representing about 70% of the cryptocurrency market cap. Its underlying index includes bitcoin, ether, cardano, bitcoin cash, litecoin, polkadot and solana, and the offering rebalances on an annual basis. Each crypto asset has a maximum weighting of 45% and a minimum allocation of 2.5%.



WALT is designed for those who want more exposure to coins besides bitcoin and ether, and its index also comprises cardano, bitcoin cash, litecoin, polkadot and solana.



BLOC and WALT each carry a total expense ratio of 145 basis points.&nbsp;



The Crypto Mega Cap Equal Weight offering, priced at 95 basis points, is the cheapest physically-backed cryptocurrency basket ETP in Europe, the firm noted. It currently allocates to bitcoin and ether, with a quarterly rebalance.



Family offices and private bank networks will likely be the first to allocate to the new WisdomTree products, Guthrie said, and the firm expects more asset managers to do so within the next year.



Sumit Roy, crypto editor and analyst at ETF.com, told Blockworks that these WisdomTree ETPs are well-designed funds and a good way for investors to get diversified exposure to crypto.



“WisdomTree Crypto Altcoins strikes me as pretty unique,” he noted. “We&#8217;ve seen ‘ex-bitcoin’ funds that invest in the top crypto tokens excluding bitcoin, but this one excludes ether as well, which is interesting.”



<h3 class="wp-block-heading">Latest launches part of larger effort</h3>



WisdomTree launched a physically backed bitcoin ETP in 2019 and brought an Ethereum product to the European market earlier this year.&nbsp;&nbsp;



The firm has generated $4 million run rate revenue from crypto ETPs in Europe, executives said during the company’s earnings call a month ago.



WisdomTree CEO Jonathan Steinberg noted on the call that he believes a spot bitcoin ETF is a superior product to <a href="https://cms.blockworks.co/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading/" target="_blank" rel="noreferrer noopener">bitcoin futures ETFs</a>, which the US Securities and Exchange Commission has recently permitted. The firm is one of many to have proposed a bitcoin ETF designed to invest in the crypto asset directly, though it, along with similar offerings from a range of issuers, awaits approval.



The SEC earlier this month <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">rejected VanEck’s proposed spot bitcoin ETF</a>, leaving many wondering <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">when the agency could approve such a product</a>.&nbsp;&nbsp;



Steinberg told analysts on the October 29 call that he is “very confident” that physically backed bitcoin ETFs will ultimately launch in the US.



“I expect that it will play a big role in clients&#8217; portfolios for those that are looking for bitcoin exposure,” Steinberg said, “and WisdomTree will play a big role within the physical market.”



Roy said he doesn’t believe these latest WisdomTree launches will put any pressure on the SEC.



“For eight years, they&#8217;ve faced tremendous pressure from the industry to approve a spot crypto ETF, but they haven&#8217;t budged,” he said of US regulators.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I think the SEC has made it clear that it will act only when it is ready to do so. That could be months from now; it could be years. We really don&#8217;t know.”</blockquote>



The launches come after WisdomTree added bitcoin futures to its Enhanced Commodity Strategy Fund (GCC) and its Managed Futures Strategy Fund (WTMF), as well as expanded its digital assets team.&nbsp;



Will Peck, WisdomTree’s head of digital assets, <a href="https://cms.blockworks.co/wisdomtree-plans-to-launch-more-crypto-offerings-in-2022/" target="_blank" rel="noreferrer noopener">recently told Blockworks</a> that the firm intends to bring more crypto products to investors in 2022 while also focusing on how blockchain can change the financial world more broadly.&nbsp;&nbsp;



While Guthrie said there are no specific plans yet for additional crypto ETPs in Europe, he expects there to me more demand for single-asset, thematic and multi-asset offerings going forward.



“How can we include bitcoin inside a commodities basket? Is there a way to put a DeFi play next to an equities offering?” he said. “These types of multi-asset thematic approaches I think are going to be very interesting in the future, and so we are looking at all of that and will look to actively grow the range.”



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DeFi

WisdomTree Launches Spot ETPs in Europe

<div id="highlights-block_6197e881c4607" class="highlights">
 <ul>
 <li>WisdomTree expanded its digital assets team to include a global head of financial crimes focused on anti-money laundering and regulatory compliance</li>
 <li>ETF product development among the ways the asset manager is positioning itself for “a reorientation of financial services around DeFi concepts,” its head of digital assets says</li>
 </ul>
 
</div>



WisdomTree is looking to bring more crypto products to investors in 2022 while also focusing on how blockchain can change the financial world more broadly.&nbsp;



“We think it’s going to be both a proof of concept but also a real demonstration of the types of value DeFi and [distributed ledger technology]-related can bring to what you might call more traditional financial services,” Will Peck, WisdomTree’s head of digital assets told Blockworks in an interview.



As part of these efforts, the fund group, which had about $76 billion in assets under management as of last month, <a href="https://www.sec.gov/Archives/edgar/data/1859001/000119312521136968/d156395dn1a.htm" target="_blank" rel="noreferrer noopener">filed in April</a> to launch a Digital Short-Term Treasury Fund.&nbsp;



Though the fund’s transfer agent, Securrency Transfers, will maintain the official record of share ownership in book-entry form, it will also be recorded, or digitized, on the blockchain.



WisdomTree had led a nearly $18 million Series A funding round for Securrency, a developer of institutional-grade blockchain-based financial and regulatory technology, in January 2020.



“Through the app made available by WisdomTree and by leveraging Securrency’s blockchain infrastructure technology, it is anticipated that fund shareholders will have the benefit of shares that will be able to operate on more than one blockchain, including the Stellar and Ethereum blockchains, via a bridge to facilitate interoperability between blockchains,” <a href="https://www.sec.gov/Archives/edgar/data/1859001/000119312521136968/d156395dn1a.htm" target="_blank" rel="noreferrer noopener">the document</a> notes.



The fact that the record will be made available on various blockchains, with the ability to transfer the record from one blockchain to another, is “a glimpse of the future,” according to Sumit Roy, crypto editor and analyst at ETF.com.



“In the future, it&#8217;s conceivable that the official record could live on the blockchain and investors will be able to trade their shares peer-to-peer through the blockchain,” Roy told Blockworks. “There are a lot of regulatory hurdles before we get there, but this is a step in that direction.”



<h3 class="wp-block-heading">Expanding its digital assets team</h3>



The firm most recently expanded its digital assets team, which now includes 12 members across the United States, United Kingdom and Ireland. The unit, which notably added a four-person research team, is dedicated to technology, compliance, legal, product, marketing, research and education related to digital assets, blockchain and decentralized finance (DeFi).



Among the new hires was John Davidson, who joined WisdomTree as global head of financial crimes. In the new role, he is focused on anti-money laundering, or AML, and regulatory compliance.



Davidson had held a similar position at E-Trade and was a managing director at Morgan Stanley. Prior to that, he spent 19 years as an enforcement attorney and AML policy specialist at the Office of Thrift Supervision, the Federal Reserve’s Board of Governors and the US Securities and Exchange Commission (SEC).



“We are embracing responsible DeFi that upholds the foundational principles of regulation in this innovative and quickly evolving space,” WisdomTree CEO Jonathan Steinberg said in a statement. “We’re a company rooted in innovation and transparency, and we see responsible DeFi as the next chapter for us and the broader financial services industry as a whole.”



WisdomTree expects more technology-focused hires in 2022, a spokesperson noted, as it looks to add to its existing application development team, which develops all client-facing analytics tools.



<h3 class="wp-block-heading">Other US ETFs</h3>



The WisdomTree Enhanced Commodity Strategy Fund (GCC) — an actively managed ETF seeking to provide broad exposure to a diversified basket of commodities — last month became the first ETF to add bitcoin futures.&nbsp;



The addition came just before the launch of bitcoin futures ETFs by ProShares and then Valkyrie Investments.&nbsp;



WisdomTree also filed with the SEC last month to add bitcoin futures to its Managed Futures Strategy Fund (WTMF). The ETF, which invests in the futures contracts of 21 commodities — such as crude oil, natural gas, gold, silver and corn — was also seeking to invest up to 5% of its net assets in bitcoin futures contracts.



The firm has proposed a bitcoin ETF that would invest in the crypto asset directly, though it, along with similar offerings from a range of issuers, awaits SEC approval. Steinberg <a href="https://cms.blockworks.co/wisdomtree-ceo-blockchain-could-disrupt-financial-industry-like-etfs-did/" target="_blank" rel="noreferrer noopener">said during an interview</a> at Blockworks’ Digital Asset Summit in September that the SEC’s hesitancy to allow a bitcoin ETF is forcing investors into inferior structures.



“We think there’s some questions and issues with a futures-based bitcoin product; obviously the contango and the position limits kind of leads to an experience where you can get significant tracking error from spot,” Peck said. “So we haven’t been focused on futures in the past, and we think the ultimate best execution is in a spot ETF.”



<h3 class="wp-block-heading">Looking ahead&nbsp;</h3>



The firm is generating $4 million of run rate revenue from its crypto exchange-traded products in Europe, Steinberg said during the firm’s third quarter earnings call last month. It launched a physically backed bitcoin ETP in 2019 and brought an Ethereum product to the European market earlier this year.&nbsp;&nbsp;



Additional strategies, such as “crypto basket” exchange-traded products, are in the product development pipeline, WisdomTree President and COO Jarrett Lilien said during the earnings call.



In the US, Steinberg said he sees a big opportunity for advisors to give their clients crypto exposure through models and separately managed accounts. He noted that the latter vehicle may be financial intermediaries’ preference amid regulatory uncertainty around crypto ETFs.



WisdomTree also partnered with Onramp, a workflow company for registered investment advisors, and crypto exchange and custodian Gemini.&nbsp;



The shared initiative, to bring crypto to advisors, got its first model win during the third quarter, executives revealed. Federal Life announced the launch of a variable annuity product that implements a WisdomTree model, comprising nearly two-thirds direct crypto and one-third disruptive technology ETFs. 



“Long-term, we think there’s going to be a reorientation of financial services around DeFi concepts,” Peck told Blockworks. “Maybe that involves more regulation or regulatory approvals or kind of some changes to how it is today, but we think it’s coming, and we want to position ourselves for that future.”



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