The Age of the Regulated Bitcoin Fund Management


As reported by Coinmetro a few weeks ago, there has been a distinct move toward fund managers, some of which are vast and long established, moving into cryptocurrency-based managed funds.

Today, another joins the fold, however this time it sets a new standard as it is the first regulated cryptocurrency-tracking fund that has the full backing of the European Union’s authorities.

Launched by electronic derivatives and fund management company Melanion Capital in Paris, France, the fund will closely track the price of Bitcoin, and represents a pioneering effort in allowing investors in managed funds the chance to access Bitcoin via mutual funds across Europe.

According to the Financial Times on August 4, 2021 in the late afternoon, the fund will track a basket of up to 30 stocks in sectors such as cryptocurrency mining and blockchain technology, which Melanion says is up to 90 per cent correlated to the price of Bitcoin.

This is a milestone launch, as it represents a massive step forward by a fund manager which has its origins in traditional assets which is now going down the route of offering fully regulated digital assets, putting paid to any notion that the financial services industry is averse to making the first steps toward showing that a regulated digital asset framework is what is needed to ensure a high quality and diversified future for discerning investors who are increasingly looking toward decentralized portfolios.

Some of the holdings in Melanion’s Bitcoin tracking index which are aimed at tracking the fund are stocks which are listed on public exchanges including Argo Blockchain and Riot Blockchain, both relatively volatile in their own right, but represent miners which have successfully listed their companies on mainstream exchanges.

It is an interesting development that the new fund will be under the Undertakings for the Collective Investment in Transferable Securities (UCITS) denomination. This refers to a regulatory framework that allows for the sale of cross-Europe mutual funds and also covers ETFs.

Within the next twelve months, Coinmetro intends to launch a cryptocurrency MTF, which aligns with the way the financial sector needs to evolve, and positions Coinmetro as a fully comprehensive challenger bank as the ETF will be able to conduct this type of methodology, as well as exist alongside Coinmetro’s existing fully regulated cryptocurrency exchange and Electronic Money Institute (EMI) licensed payments functionality all in one platform.

Currently, a number of exchange-traded notes and products that track Bitcoin exist, such as the $242m Wisdom Bitcoin ETP. While they are regulated as securities, they do not fall under UCITS hence the Melanion fund is a trailblazer.

It is clear that the days of multi-lateral institutional funds based on digital assets are fast approaching, therefore being able to use a fully regulated exchange and payments channel are vital to be able to grow as the cryptocurrency world evolves, and decentralized exchanges moving towards MTF functionality is the next logical step.