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Switzerland’s main stock exchange has given a green light to the world’s first exchange traded product tracking multiple cryptocurrencies, just as the price of bitcoin, the most popular digital coin, has dropped to its lowest level for more than a year. The Amun Crypto ETP, which will start trading next week on the Six exchange in Zurich, has been designed to track an index based on the movements of five leading cryptocurrencies. Just under half of the ETP’s assets will be invested in bitcoin with the remainder divided between XRP (25.4 per cent), ethereum (16.7 per cent), bitcoin cash (5.2 per cent) and litecoin (3 per cent).
The ETP will carry an annual management fee of 2.5 per cent. Hany Rashwan, co-founder and chief executive of Amun, a London financial technology company, said the cryptocurrency ETP had been constructed to meet the same strict standards required of conventional exchange traded products widely used by investors. “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,” said Mr Rashwan. Two rival providers, CoinShares and Greyscale, already offer digital currency investment vehicles, but these are different legal structures and linked to single coins. Jane Street and Flow Traders, two specialist market makers, have provided seeding for the Amun ETP and agreed to act as authorised participants.
The ETP will trade under the ticker Hodl, a nod to a favourite exhortation adopted by cryptocurrency investors — “hold on for dear life” — in response to the wild volatility that has roiled the market. The value of bitcoin rose as high as $20,000 last year and has now fallen to less than $5,550. Benoît Cœuré, one of the eurozone’s top central bankers, last week described bitcoin as “the evil spawn of the financial crisis”. Mark Carney, governor of the Bank of England, said in March that cryptocurrencies were “inherently risky” compared with traditional financial assets and called for tighter regulation. Critics have argued that cryptocurrencies have been exploited by criminals for money laundering, terrorism financing, drug transactions and tax evasion. US regulators have rejected multiple applications to launch cryptocurrency exchange traded funds because of concerns that such vehicles could expose investors to “fraudulent and manipulative acts and practices”.
The IMF suggested last week that central banks should consider issuing digital currency as a way to reduce the costs to society associated with the use of cash. Christine Lagarde, head of the IMF, said that digital currencies backed by governments could help people and businesses in remote and marginalised regions. “We know that banks are not exactly rushing to serve poor and rural populations. There may be a role for the state to supply money to the digital economy,” said Ms Lagarde. Nouriel Roubini, the economist known as Dr Doom, said a digital currency system backed by central banks would hammer “the final nail in the coffin” of existing cryptocurrencies. It “would be more secure, cheaper, scalable, safe, anonymous, efficient, innovative, financially stable than any cryptocurrency ever,” tweeted Mr Roubini.