The Crypto ETP Runs on the Blockchain, Trading Starts Wednesday, Bell Rings Thursday

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Switzerland’s Six Swiss Exchange will have a ceremonial bell ring on Thursday to mark the listing of the Crypto ETP.

Meaning there will be some pomp and circumstances to mark the world’s first stock listed crypto fund which had been in preparation for about 1.5 years.

Hany Rashwan, CEO of Amun AG, the start-up behind the crypto ETP, was described by Forbes last year as “a master at failing fast and failing often— experience Silicon Valley values.”

A serial entrepreneur, he previously attracted funding from Tim Drapper who said last year “Hany perseveres like crazy; he has a mission, and it is a good and big one.”

An Egyptian by birth, he made it last year to Forbes 30 under 30 list in tech. “I’m not sure what I’ve done to be worthy of this, to be honest,” he said.

“I’m a deep believer in crypto based on both my personal and professional experience, and based on both the economics and philosophical foundations I believe it has,” Rashwan told Trustnodes.

A computer engineer who built two gaming sites at the age of 14, Rashwan says the Crypto ETP “would not exist if it wasn’t for our tech platform.” Adding:

“We’ve built a blockchain enabled fund administration platform that powers all of this. That’s what we’re most proud of and it’s something that we hope is a positive application of blockchain technology. Our goal is to invest most heavily in our tech infrastructure…

We use and plan to use blockchain to do things like settlements and clearing. All of our partners and service providers use this platform.

Being the first to do this posed certain challenges because a lot of the infrastructure was not present so we had to build a lot of it ourselves. Where we could utilize the blockchains to speed up processes, we did or are planning to. This is what we’re most excited about…

It uses the public blockchains of all assets in index to measure transfers, ownerships, and other processes. It makes us able to operate this and also the processes are at times faster because we use the blockchain…

We do all of this through APIs and enable our partners to incorporate that into their workflows. A lot of it was slower and manually done by humans before…

A lot of the operations behind stocks include record keeping and communication between many coordinating parties. We use the public blockchain to better those processes.”

The tech platform isn’t explained in depth anywhere publicly, but Amun appears to have devised a method to sort of blockchenize some of the backend processes.

That’s needed because due to Swiss law and applicable exchange regulations of the SIX Swiss Exchange, ETPs are required to be backed 100% by the underlying asset. Rashwan says:

“The product is a Swiss ETP not an ETF. It isn’t based on futures. When an investor purchases, a corresponding amount of actual crypto assets is purchased then stored with a qualified custodian.”

The custodian is Kingdom Trust which Reuters says has secured insurance coverage through Lloyd’s of London for cryptos in their custody.

Jane Street and Flow Traders will act as authorized participants for market making according to FT whereby the purchased stock is converted into actual crypto, meaning they will buy crypto currencies according to index rules for storage with custodian.

In addition, “VanEck’s index arm is our independent index administrator,” Rashwan says. They have no role in the ETP. “It’s VanEck’s index arm only and only with respect to HODL5 index.”

Rashwan gave no comment on whether the Securities and Exchanges Commission (SEC) is now likely to approve a crypto ETF by VanEck or other applicants.

“We are a Swiss company focused on our own product and area,” Rashwan says. Asked how long it took to reach this stage, Rashwan say:

“Have been researching how to do this for maybe 1.5 years, but public records would show Amun AG was incorporated in July of this year.”

He would not say when they applied to the relevant regulator, in this case SIX listing, but preliminary approval was given in September.

It thus looks like the regulatory process took just five months from probable application in July to now start trading on Wednesday with the bell ceremony on Thursday.

In contrast it took three years for SEC to reach a decision on the first bitcoin ETF application. Many more such applications were made since then and likewise it has taken more than a year to reach a conclusion which so far has been denial.

Asked how he found the process, Rashwan says: “It was a difficult and long process, but we have been humbled by the hospitality of our Swiss partners since day one and found the people here to be professional, careful, forward-thinking, and efficient.”

He would not say why they went with an ETP rather than an ETF, but said “we very much wanted to do this in Switzerland. We’re glad we found a way of doing that.”

Why Switzerland and not say London? – we asked. Rashwan highlighted part of the fund’s website which says: “With its traditions of international neutrality, national sovereignty and regulatory stability, we believe this is the best jurisdiction in the financial world.” He then adds:

“We plan on releasing more products across more geographies and look forward to working with local regulators everywhere we’re welcome. But love having Switzerland as our base.”

Meaning this might be just the first of many, with Rashwan stating “We want to make investing in crypto as easy as buying a stock across multiple products and geographies, working with local regulators.”

Many were surprised by XRP currently accounting for some 30% of the index’s distribution, but that’s due to a passive algorithm of sorts that uses future market cap to have a better comparison between coins that might have vastly different inflation schedules or pre mined/mined statuses.

As much seems to be passive, the fee of 2.5% has been criticized by some, but there are added crypto custody costs which might make the fee more in line with other likewise products.

There’s Coinshare’s ETN for example which is listed on Stockholm’s Nasdaq and likewise has a fee of 2.5%. The ETNs are specific to just bitcoin or eth, while the ETP has a basket of five cryptos. Otherwise they sound similar as Coinshares says the ETN is fully collateralized, but Rashwan says “ETNs don’t have to be fully collateralized. Swiss ETPs do.”

“It’s basically 100% collateralized debt,” Rashwan says. While ETFs are more of a fairly direct method of having actual ownership of the product, but without holding it. In a crypto ETF, for example, you can convert the stock into actual crypto which arbitragers would do to keep ETF’s price in line with the underlying asset.

The ETP however is basically a stock and a listed security, so one could buy it like any other stock. Making this one of the first step of cryptos into the traditional stock market.

How this will perform remains to be seen now starting this week, with other stock products potentially to follow as cryptos keep on marching towards mainstream.

Copyrights Trustnodes.com

 

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