Amun AG, a startup in Zug, has received approval from the Swiss authorities to sell a cryptocurrency-based ETF.
What is an ETF?
An ETF, or an exchange-traded fund, is a pot of investments managed by a company. Customers can buy a share of this pot and gain or lose money according to its performance. Their shares do not afford them actual ownership of the commodities which the company is invested in.
In the US, many companies have tried and failed, to get a license to sell Bitcoin ETFs. In this case, the commodity invested in would be Bitcoin futures, which are allowed in that country. Bitcoin futures are an investment product similar to ETFs in that purchasing one does not give you ownership of an actual Bitcoin. So an ETF based on Bitcoin futures would effectively mean customers are betting on the success of other people’s bets. The American Securities and Exchange Commission has so far decided that this compound risk is not worth it.
I think there’s too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.
— Vitalik Non-giver of Ether (@VitalikButerin) July 29, 2018
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‘Elegantly crafted in Switzerland’
In the case of Amun AG (not to be confused with Amun Capital AG, which is acquisition firm in Hong Kong), the ETF will be based on an index of “the top and most liquid crypto assets” which the firm has called ‘HODL5’. According to its website, these five coins are Bitcoin, Ethereum, XRP, Bitcoin Cash and Litecoin. The bets will be on their amalgamated performance. The firm decided on these after excluding anonymity-based coins like Monero, stablecoins like Tether, coins that trade on “non-reputable exchanges”, and coins that are less than six months old.
According to Trustnodes, the company buys cryptocurrency with cash paid by customers, and then sends it to a custodian to hold. The company charges a 2.5 percent management fee.
Amun’s main claim to fame, of course, is its licence from the Swiss authorities, and listing on a major stock exchange. Amun claims on its website to be the first “first listed crypto index product.”
The exchange is SIX Swiss Exchange, the biggest such entity in Switzerland. Based in Zurich, the company is worth well over one trillion dollars and took in more than $100 billion income over the first half of 2018.
Amun CEO Hany Rashwan said: “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.”
In July, SIX Group, the company behind the exchange, announced that it was making a cryptocurrency exchange too, which was to be called ‘Swiss Digital Exchange‘ and regulated by all the relevant Swiss authorities.