While the U.S. Securities and Exchange Commission rejects proposal after proposal to create an American exchange for Bitcoin traded funds, Swiss regulators have given the green light to the main Swiss stock exchange to launch the first exchange-traded product tracking multiple cryptocurrencies.
The Amun Crypto ETP began trading last week in Zurich. The ETP has been crafted to track an index based on the fluctuations of five cryptocurrencies. Nearly half of ETP’s assets will be invested in Bitcoin, with 25.4 percent in XRP, 16.7 percent in Ethereum, 5.2 percent in Bitcoin cash, and 3 percent in Litecoin. Another 2.5 percent will be the annual management fee.
Amun Crypto ETP will trade under the ticker Hodl, the ironic term adopted by cryptocurrency investors due to the volatility of the market. ETP creator Hany Rashwan, co-founder and CEO of Amun, said his cryptocurrency was designed to meet the same strict standards required by conventional exchanged-traded products used by investors. As noted in CCN,
“The Amun ETP will give institutional investors that are restricted to investing only in securities or do not want to set up custody for digital assets exposure to cryptocurrencies. It will also provide access for retail investors that currently have no access to crypto exchanges due to local regulatory impediments.”
The ETP is not the first digital currency investment exchange, but two rivals, CoinShares and Greyscale, have different legal structures and are tied to single coins.
While Swiss regulators have given the go-ahead, the SEC has rejected nine applications to launch cryptocurrency exchange-traded funds so far out of concern that investors could be exposed to “fraudulent and manipulative acts and practices.” The SEC also is concerned cryptocurrency exchange funds could destabilize the US financial sector.
Despite SEC objections, Gabor Gurbacs, the Director of Digital Asset Strategy at VanEck/MVIS, predicts in published reports that Bitcoin ETF will be approved within months. The SEC has two more cryptocurrency exchange fund proposals to review, including one from VanEck.
Gurbacs, in a published report, said the SEC’s rejections previously stem from the same set of problems that each of the applicants had failed to cover. These include:
Manipulation of The Underlying Asset
VanEck’s executive team has avoided these mistakes by designing a Bitcoin ETF that meets SEC guidelines (as gleaned through previous meetings with regulators. As Gurbacs reveals,
“We’ve met with regulators a few times and made sure we understand their questions, spending years – literally years – to answer those questions and build the proper market structure: What’s the right pricing, should surveillance be in place, how do you trade institutionally, how do hedge against market manipulation,” he said in a recently published interview.
What’s more, VanEck has also devised its very own pricing source, built upon feedback from the SEC. Gurbacs said VanEck’s tweaks draw data from three established over-the-counter pricing feeds. Nasdaq.com quotes Gurbacs as stating,
“Regulators were very keen on the fact that spot platforms like Coinbase, Gemini and the like are technically regulated entities, but not really meant to be brokers for commodities. In some regulators’ eyes, these entities aren’t regulated. In the US, market data is accessible to regulators should they subpoena or flag any suspicious activity.”
What Gurbacs hopes is history will repeat itself. VanEck was the first major financial player to introduce a gold equity mutual fund in 1968. Fifty years ago, the global gold market accounted for about $200 million, when gold sold for $35 an ounce. Now gold trades for $1,200 an ounce and the market cap on gold exchange funds is valued north of $7.4 trillion.
Gurbacs noted that gold’s first investment vehicles were originally considered highly volatile and speculative, traits attributed to Bitcoin in its decade of life.
“Back then, gold wasn’t sexy either,” he said. “It was like bitcoin a few years ago.”