While there is little doubt remaining that blockchain is a powerful and transformative technology being leveraged across an ever-growing range of sectors, its energy footprint as an industry has been deemed as unsustainable at the current pace. As a result, many mainstream investors with a focus on environmental, social, and governance (ESG) issues are still hesitant to participate in the disruptive technology, despite the potential profits.
The new Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF, which goes by the NYSE ticker RIGZ, is an actively managed exchange-traded fund that invests in cryptocurrency mining and mining hardware industries. Believed to be the first of its kind in the U.S., RIGZ was created to align profit with purpose to serve the growing number of investors keen on gaining exposure to cryptocurrency but also value environmental sustainability.
Bitcoin does the S and G — now for the E
Blockchains like Bitcoin work off of proof-of-work algorithms, which must be solved by computers through cryptographic calculations in order to mine the BTC tokens. The same is true of Ethereum in its current state.
The energy required by Bitcoin, Ethereum and other proof-of-work miners result in high energy consumption. Recent research from the University of Cambridge’s Bitcoin electricity consumption index showed that Bitcoin mining alone is utilizing around 0.6% of the global electricity consumption — more electricity than the entire country of Argentina uses in a year.
However, Viridi sees the Bitcoin mining sector as particularly well suited to environmentally sustainable investing as, according to recent figures, over 50% of North American Bitcoin mining is now done using renewable energy. These figures may receive a further boost in future due to China’s cryptocurrency mining clampdown, which has forced the shut down of many coal-powered Bitcoin mining operations and an exodus of miners seeking new homes in places like the United States.
“The sentiment is all about the carbon footprint and energy consumption of the computing network,” said Wes Fulford, CEO and co-founder of Viridi Funds, in an interview with Forkast.News. “Obviously, with what’s happened in China the power used is dramatically lower than it was at the beginning of June. And it’s also providing the added benefit that more computing power is finding its way to other jurisdictions, sort of decentralizing the network even further, which adds to the security.”
The ETF will invest in companies associated with the entire spectrum of cryptocurrency mining and infrastructure — ranging from producers of semiconductors and specialized computer chips, to manufacturers of cryptocurrency mining hardware, to mining companies who secure long-term energy offtake agreements.
“Looking at ESG principle, Bitcoin and Ethereum, other leading cryptocurrencies, they address the ‘S’ and the ‘G’ pretty well — bringing banking to the unbankable, a sovereign currency not tied to the printing presses of any one particular government, in addition to a network from a governance standpoint that is maintained by a portfolio of distributed computing power, the miners themselves that are incentivized by the protocol,” Fulford said. “Our funds and the attention with this product is to focus on the ‘E.’”
Why US has Bitcoin mining ETF but no Bitcoin ETF
The goal of establishing a Bitcoin exchange-traded fund (ETF) has since 2013 been a hot topic in the cryptocurrency and investment space, but with the rise in both the Bitcoin market size and the accompanying institutional interest, the desire to launch a Bitcoin ETF in the United States is now reaching fever pitch. The SEC is currently reviewing over a dozen active Bitcoin ETF applications which include firms such as VanEck; WisdomTree; Kryptcoin Investment Advisors; Fidelity-linked Wise Origin Bitcoin Trust; Bitcoin subsidiary of Stone Ridge Asset Management NYDIG; Valkyrie, the operator of the Valkyrie Bitcoin Trust (BTCV); Anthony Scaramucci’s SkyBridge Capital; and New York-based Simplify.
Although Bitcoin ETFs have already been launched in Canada and Brazil to great success. To date, however, not a single application among the growing list has made it past the Securities and Exchange Commission (SEC). So why was Viridi’s crypto mining ETF any different?
“In the public markets in Canada, there are several products trading as digital asset ETFs but in the U.S. it’s a question mark,” Fulford said. “With the SEC, there’s obviously a number of applications outstanding waiting for a decision or approval to list a direct digital asset ETF in the U.S. markets which are sitting in limbo and in a public review and comment process.”
Viridi’s clean energy crypto mining ETF is different because it is an equity investment ETF, no different than some of the other sort of domestic equity investments vehicles that the SEC has approved countless times before, Fulford said.
“Our ETF invests its shareholder contributions or investor dollars into public equities traded in global markets,” Fulford said. “All of those publicly listed companies have gone through the SEC process to list their securities and abide by regulatory governance requirements, continuous disclosure requirements. This is an equity investment ETF, very similar to hundreds, if not thousands of other products, trading and in global markets.”
Although the Fund will not invest directly in cryptocurrencies, investors will likely have indirect exposure to Bitcoin, Ethereum and other cryptocurrencies as many publicly listed miners have these assets on their balance sheets.
Viridi Funds is also backed by CoinShares, Alameda Ventures, Luxor Technology, Fundamental Labs and Mechanism Capital.
