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WisdomTree Takes TradFi to Blockchain, Gets Regulatory Green Light

WisdomTree’s fund that bridges the world of traditional finance and the digital economy has gotten the go-ahead from regulators and became effective as of September 26, explained Will Peck, head of digital assets at WisdomTree, in a recent blog post about the fund. There is a catch to investing right now, however.

The WisdomTree Short-Term Treasury Digital Fund (WTSY) seeks to track the Solactive 1-3 Year Treasury Bond Index, offering investors the opportunity to preserve capital while also generating income by focusing on shorter duration bonds that are generally less interest rate sensitive than their longer duration counterparts.

The twist is that it’s a digital fund with multi-chain functionality. A primary record for WTSY is kept in the standard physical books-and-records while a secondary record of share ownership is kept on either the Ethereum or Stellar blockchains by Securrency Transfers, Inc, the transfer agent. Investors will also be able to initiate their own approved transactions and hold a record of the shares on the blockchain in their supported blockchain wallet.

“Blockchains can allow for atomic settlement (where software ensures assets are exchanged in settlement) as opposed to other potentially riskier settlement processes, like delivery versus payment (DvP),” Peck wrote, speaking to the benefits of blockchain technology. “The programmable nature of blockchains and tokens allows for code-based enforcement of rules in financial processes like we’ve seen in many DeFi projects, which has the potential to make financial transactions more rules-based and predictable.”

Traditional Trading Goes Digital With WTSY

The fund is a 1940-Act registered product just like a more traditional mutual fund and does not invest in any cryptocurrencies: instead, it is taking the bookkeeping and ability to individually trade shares to the blockchain through the WisdomTree Prime digital wallet application. The app is currently still in beta and offers access to a broad array of crypto assets but interested advisors and investors can sign up for the waitlist here.

Although it will have the ability to transact on the blockchain, because of the mechanisms and regulations around registered securities in the U.S., digital trades will not be able to be done anonymously as many have come to associate with crypto. It will open up the door for individual investors to trade shares of the fund on the blockchain and hold the record of that in their digital wallets, however, and is a major, innovative step in bringing traditional finance into the realm of the digital economy.

“When our CEO and founder, Jono 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,” Peck explained.

“We think this type of fund can bring mainstream assets, like U.S. treasury bonds, into the evolving digital ecosystem, with the potential to unlock future use cases for these assets and distribution opportunities.”

WTSY will carry no management fees for shareholders on its own, but WisdomTree affiliates are anticipated to charge other fees, such as for facilitating transactions.

For more news, information, and strategy, visit the Modern Alpha Channel.


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