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French asset manager to launch EU-regulated fund that closely tracks the price of bitcoin, marking one of the first times that investors will be able to access hyper-volatile asset through mutual funds placement across the block.
Paris-based Melanion Capital, a computer-based derivatives fund manager that has grown into digital assets, recently received approval from the French regulator to launch an EU-standard exchange-traded fund known as the UCIT name.
The fund will follow a basket of up to 30 stocks in sectors such as cryptocurrency mining and blockchain technology, which Melanion says is 90% correlated to the price of bitcoin.
The launch shows how fund companies are becoming increasingly creative in the face of financial regulators who are often skeptical or slow on the rapidly changing world of digital assets.
“I have yet to see any funds launched focusing on digital assets under the umbrella of Ucits,” said Winston Penhall, funds lawyer at Keystone Law in London. The way regulators view bitcoin and other cryptocurrencies is “a little bit of an open mind,” he added.
OPC funds, which are sold throughout the EU and are also popular in Asia and Latin America, are considered an international benchmark for fund regulation. They form the bulk of European mutual funds and offer high levels of investor protection. But their rules were first established over 30 years ago and do not directly apply to cryptocurrencies like bitcoin.
Most national regulators interpret the rules to mean that digital assets cannot be directly held in funds, unless they are linked to listed securities. This makes it almost impossible to launch a Ucits fund investing primarily in bitcoin which can be sold across the block and come with guarantees for consumers.
“Most of the tips of the traditional financial system end with access to bitcoin,” said Jad Comair, CEO of Melanion. “The ETF was a real challenge due to the sensitivities and politics surrounding bitcoin and investing in bitcoin right now.”
Among the main holdings of the Melanion Index, which the fund will track and which is calculated by German fintech Bita, are stocks such as crypto miners Argo Blockchain and Riot Blockchain, the investment management firm Galaxy Digital, headed by entrepreneur Mike Novogratz, and broker Voyager Digital. . Stocks are weighted based on their sensitivity to bitcoin price movements.
Ireland’s central bank said last year it was “aware of both the significant opportunities and the material risks associated with crypto-assets.” However, European regulator Esma noted in March this year that “some crypto assets are very risky” and most are unregulated in the EU.
There are a number of notes and exchange traded commodities that track bitcoin, such as the $ 242 million Wisdom Bitcoin ETP. Although they are regulated like titles, they do not have the coveted Ucits cape.
In the United States, a series of fund companies, including Cathie Wood’s Ark Invest, have unveiled plans for bitcoin ETFs, although the Securities and Exchange Commission has yet to give its approval.
The French fund, called Melanion BTC Equities Universe Ucits ETF, will be listed on Euronext in Paris and charge a fee of 0.75%.