VanEck, the $77.8 billion asset under management firm, is preparing to roll out its Ethereum futures exchange-traded fund (ETF) as the race for ether (ETH) futures fund heats up.
Here with more insights on the Ethereum ETF race is Van Eck, head of Digital Assets product Kyle de Cruz. Welcome to the show, Kyle. Good morning. Thanks for having me on. Thanks for being here. All right, you just came up in our last segment. We're talking about how each of the firms that are launching this ETF today are going to differentiate themselves from each other. Uh Talk to us about how Van Eck plans to stand out amongst these nine firms. Absolutely. As it was alluded to all, we're all investing in Ethereum futures contracts. And so really the only ways you can differentiate yourself are obviously cost, which were coming in significantly lower than most of the others at 66 basis points. And then further to that is how you structure the ETF. So we structured our is AC Corp and we feel that's a superior uh tax advantage vehicle for taxable, long term investors. And really that comes down to uh the long term benefit of being able to carry forward and carry back your losses in, in a asset class like crypto, obviously, that can be instrumental for investors. Yeah, if you could explain that a little bit more about the C Corp, uh some of the other structures that, that are out there in the market today. Um And how that, that might benefit certain tax payers. That's right. So essentially Etfs, most etfs that we all know and love are structured as RS. And so the C Corp, the difference between the C CORP is there's one negative and that's taxes accrue, corporate taxes accrue at the fund level daily. And so you may see a NAV underperform in both periods, however, counter to that, you are afforded the ability to carry forward losses. And so in down years, in A R, all those losses are actually just lost. And so in AC Corp, you can carry those forward and offset your future gains. In addition to that, all distributions from A R are taxed at your ordinary income rates, which can be as high as 37%. And so with investors in the CC Corp, you're actually taxed at QDII rates which is about 20%. But you're, you, you're taxed twice, right? You're, you're basically, you're taxed on the C Corp level and then you're taxed on personal, in personal income level that doesn't, uh you, you, you, as you mentioned that the, the carry forward would basically accrue to the C Corp not to the individual, correct, but it accrues to the NAV. So that is in your performance of the fund. And so when, when taxes are offset in the future or even three years back to call back taxes and, and the investor realizes that through the NAV and, and, but that's, that's assuming they're gonna hold for, for extended periods of time. Correct. That's correct. And that's why this structure is really ideal for longer term taxable investors. Let's talk about one of the other differentiators that Cynthia brought up in the last segment. Van E also announced that it's going to donate 10% of all profits from the futures ETF to Ethereum core developers for 10 years. Talk about what went into making this decision and how it's gonna work. Yeah, I think Vanex sits at a really unique intersection of traditional Trad if you will firm uh founded in 1955 to uh a kind of a crypto native uh uh future looking form. And one of the benefits of having this talent uh is people that are working and using this emergent technology daily. And so we are aware of the work and uh the time that these developers spend to maintain this Blockchain that we all are using. And so it makes sense that we all stand to gain both Trad and crypto native that we should be supporting that community. And so it really was a no-brainer. So, so just to be sure though, uh is it, is this gonna be like the Hollywood bottom line where there's never a profit? Uh How is this, how is this gonna work in terms of uh you know, as you mentioned, it's the court and that if there are losses, those losses go, they can basically carry forward to the future of clawback in the past. So how would it work here in this situation? Is it annually, is it uh based on like how, how are you calculating such such profits and, and as a and as a shareholder? Why, why don't I just get the profits? Why, why not let me deal with it and and allocate it to developers the way I want to, why do I have to have you guys do it? Sure. Now to be clear, this is va sharing our profits from the fund with the community. This is not impacting the shareholders of the fund directly. And so we will work with the details with protocol guilt um to figure out the timing, but to be clear, we intend to be fully transparent with this donation. And so to the extent we can be transparent and show transactions online, we will do so. Of course, the these details need to be finalized with the protocol guilt and va so, so, so that's uh that's the profit you're making on, on the uh on the transactions. But let, let me ask about kind of what happens today. I and this is a question asked uh previously to our previous guest. What happens if these uh you and the the other eight or so that have been approved for today? What if it, if it's lackluster? What does that mean? God forbid, I know, you know, this everything's gonna be perfect and great. You can fingers cross the whole works. But the reality is this, the, the world is a different place than it was a couple of years ago. What happens if this is the lackluster uh release? What does it mean for spot ETF S? What does it mean for the overall crypto eco ecosystem? If this underperforms uh investments today? Sure. I, I think, you know, for one, you're right as you alluded to, it's a different market today than even when Bitcoin futures ETF S were launched. Um Certainly things were, were going much better in the crypto space. But I think regardless of the amount of asset managers launching these products, this is, this is a monumental step forward for crypto. And the reality is since 2017, we were one of the first established ef issuers to file for a Bitcoin linked TF. We have always followed that ethos of if you want crypto exposure, you should buy it directly in self custody it. If you can't, then the next best way is to buy that through an EF and so we think there are a lot of investors out there today that either can't or won't buy spot crypto. And this product is really for those, Kyle. Thank you very much for joining the show. This morning and congratulations on the lunch. Good luck. Thank you all for having me. That was head of digital assets product, Kyle de Cruz.