Newly filed Bitcoin ETF application targets ESG investors with carbon credits

As the SEC seems poised to approve the first batch of spot Bitcoin ETFs, the proposal from 7RCC represents a different approach that appeals to ESG investors, helping offset the environmental impact of the energy-intensive asset.

“There’s a lot of negative narratives around Bitcoin mining and the carbon footprint,” said Rali Perduhova, cofounder and CEO of 7RCC Global. “We want to target that group of institutional investors that need that ESG tick mark.”

ESG—or environmental, social, and governance—has emerged as a hot-button investing strategy in recent years, allowing firms to adopt a more socially conscious approach by targeting assets that address issues like climate change and diversity.

While the approach has its detractors, especially among Republican lawmakers who have denounced the SEC’s rulemaking around the framework, it has also attracted asset managers. A 2022 Harvard survey found that 81% of institutional investors in the U.S. plan to increase their allocations to ESG products over the next two years, with assets under management expected to double to $10.5 trillion by 2026.

ETFs, or exchange-traded funds, have emerged as a popular vehicle, allowing investors exposure to a basket of assets. Still, with the SEC seemingly poised to approve a slew of spot Bitcoin ETFs in January, the cryptocurrency-related products seem out of reach of environmental-conscious investors because of the carbon footprint of Bitcoin mining.

7RCC’s proposed ETF, which would trade under the ticker name BTCK, would create a carbon-neutral trading strategy by composing its product of 80% spot Bitcoin and 20% carbon credit futures. Monday’s S-1 filing does not touch on the thorny debate over whether to offer a cash or in-kind mechanism for authorized participants to create and redeem the Bitcoin ETF shares, which is currently the subject of meetings between prospective issuers like BlackRock and the SEC. 7RCC tapped Gemini to serve as custodian and is using the financial platform Tidal to white-label its ETF.

The 7RCC Spot Bitcoin and Carbon Credit Futures ETF is the first offering for the firm. A senior advisor for the project is Matthew Homer, a former executive deputy superintendent at the New York Department of Financial Services and managing member of the digital asset-focused venture firm Department of XYZ.

“There is definitely a huge conversation around ESG right now,” said Perduhova. “It’s a lot of funds to capture.”