Could Switzerland Become Home to the First-Ever Crypto ETF?

Crypto Fund AG has announced the creation of a “Cryptocurrency Fund” which will invest in a variety of digital currencies such as bitcoin, ether and ripple, among others. The fund plans to launch in Q4 2017.

This would be Europe’s first ever diversified cryptocurrency fund. The fund is based on a Cryptocurrency Index which “invests in the largest virtual currencies by market capitalization and liquidity.”

This development would bring a new level of investment transparency to the digital asset class market.

“The fund will be highly diversified,” said Jan Brzezek, CEO of Crypto Fund AG. He explained that this diversification will lead to lower levels of volatility while still reaping the “high growth” benefits of new cryptocurrencies.

The fund’s goal is to raise roughly $113 million (€100 million) of assets under management during the first year with the ambitious target of $3.4 billion (€3 billion) within three years. The fund already has investors who have dedicated $11.3 million (€10 million) with an additional $11.3 million (€10 million) in transition to the pool.

The fund,
headquartered in Zug, Switzerland, has already initiated preliminary discussions with the Swiss Financial Market Supervisory Authority (FINMA), the body responsible for financial regulation. Switzerland has historically had a positive track record with cryptocurrencies and their regulation. It recognizes virtual currencies as a class of assets and is currently home to a variety of bitcoin financial companies.

Not the First Attempt

This is not the first time an entity has attempted to register a bitcoin financial vehicle.

In July 2013, Cameron and Tyler Winklevoss filed to establish the first cryptocurrency Exchange Traded Fund (ETF), the Winklevoss Bitcoin Trust, with the United States Securities and Exchange Commission (SEC). A bitcoin ETF would allow investors to invest in bitcoin without actually owning the digital asset. This would have radically increased the accessibility of bitcoin and brought a flood of new investors to the decentralized currency.

However, just earlier this year, the SEC ruled against the establishment of the Winklevoss Bitcoin Trust due to the lack of regulation that occurs on bitcoin markets. However, the SEC did note that as bitcoin continues to emerge from its nascent form, more regulated markets could appear, thus “the Commission could consider whether a bitcoin ETF would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act.”

Though this initial attempt in the U.S. was unsuccessful, Crypto Fund AG appears to have more promise in moving forward. Zug, Swtizerland, often called “Crypto Valley,” has proven to be a strong foundation for the stable regulation of digital currencies. Additionally, the Cryptocurrency Fund has key advantageous differences from the Winklevoss ETF.

“Unlike the Winklevoss ETF, which was rejected by the SEC, we use the regulated and proven Swiss fund structure according to the Swiss Collective Investment Schemes Act (CISA), where the asset manager, the fund management company and the custodian bank are legally separate from each other,” said Brzezek. Additionally, unlike the Bitcoin Investment Trust, it will not be listed on an exchange and will “exclusively target qualified investors.”

The company is led by CEO & co-founder Jan Brzezek, Dr. Tobias Reichmuth, and Marc Bernegger. Brzezek previously served as president of UBS Asset Management and as regional president for UBS Group EMEA. He is joined by Reichmuth and Bernegger two fintech specialists who have founded SUS Partners AG and usgang.ch, respectively. They are advised by MME Legal, a law firm specializing in blockchain technology and ICOs.