Grayscale places bet on data privacy with industry-first ETF
Crypto asset management giant seeks to invest in data privacy providers, as well as blockchain and AI-based cybersecurity.
Grayscale, the world’s largest crypto asset manager, is looking to invest in the emerging market for data privacy with a new exchange-traded fund.
As detailed in a prospectus filed with the SEC on Tuesday, the bitcoin ETF provider is looking to launch a passive privacy-focused thematic index fund on the NYSE Arca exchange.
Following its underlying benchmark, the Indxx Privacy Index, the ETF will invest in developed and emerging market companies that are involved in providing data security and protection, data privacy, and cybersecurity products and services. Those products and services may include blockchain-based technology, artificial intelligence, and edge computing solutions, according to the prospectus.
If Grayscale gets a green light from the Securities and Exchange Commission, it could be getting in on the ground floor of the next technology mega-trend.
With the growing adoption of digital and remote technology around the world, including for financial transactions and wealth management, data privacy has become a crucial concern across the spectrum of stakeholders including regulators, firms, advisors, and clients.
Some investors also count data privacy and cybersecurity as a responsible investment issue, with some going so far as to divest companies from their portfolios if they sell or are otherwise unable to protect their customers’ data.
Grayscale said the index for its proposed ETF will invest in data privacy by cutting across five core sub-categories including:
- Data privacy solution providers;
- Cyber service providers;
- Blockchain-based privacy solutions;
- Network and communication security providers; and
- Privacy-preserving protocols.
Based on its current methodology, the index gets exposure to privacy-preserving protocols – digital assets designed to obscure users’ identities and transaction details – through the Grayscale Zcash Trust.
Grayscale says its privacy ETF will not invest in digital assets directly and will not invest in initial coin offerings. However, it may have indirect exposure to those alternative assets through its investments in companies and exchange-traded vehicles that use or hold those alternative assets.
If approved, the privacy ETF would be the first thematic fund of its kind in the U.S. – but not the world. Rize ETF, an asset manager based in Europe, already offers a cybersecurity and data privacy ETF, which is managed by ARK Invest.
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