Coinbase has recently announced the launch of a cryptocurrency index fund consisting of the digital assets they carry on their exchange, weighted by market capitalization. The new investment vehicle will mark the platform’s first plunge into asset management.
The index fund was announced via Medium and Twitter this past week and offers investors an opportunity for diversified exposure to the emerging asset class of cryptocurrencies rather than individual assets.
Product Manager, Reuben Bramanathan, clarified through Medium that the fund is intended to provide both new and institutional investors with the capacity to invest in the potential of blockchain-based digital assets as a whole. He states:
“We are noticing people coming to the space for the first time, being excited about cryptocurrencies, but not knowing where to start, so we’re excited to give people the ability to get broad exposure to the entire asset class rather than having to select individual investments.”
The new Coinbase index fund will only be available to US-based accredited investors, with a minimum investment of $10,000 USD and 2% annual management fee with no additional performance fees.
Our plan for Asset Management:
Step 1: offer Coinbase Index Fund to US-resident, accredited investors
Step 2: make available to all investors
We’re working on launching more funds which cover a broader range of digital assets. Stay tuned.
— Coinbase (@coinbase) March 6, 2018
The fund’s composition will resemble the current market capitalization of each coin currently listed on Coinbase. Whenever a new digital asset is listed on the GDAX exchange it will be automatically listed onto the index fund. Investments can be made in USD or any of the coins on GDAX.
Index fund investors must meet requirements for “accredited investing” as according to US SEC requirements. This includes having earned income that has at least exceeded $200,000 (or $300,000 together with a spouse) over the last two years. As well as possessing a net worth of over $1 million, either alone or together with a spouse
Coinbase also announced the development of various alternative funds that will contain various digital assets which may or may not be on GDAX. This will reportedly come with less stringent investor requirements.
The new index fund possesses strict qualification requirements in order to remain compliant, as allowing less experienced investors often comes with greater regulatory challenges. This index fund, however, may open up doors to launching an eventual fund for a wider range of investors. As Bramanathan stated in an interview with Bloomberg:
“When people think about a retail index fund, they’re talking about an ETF, and that’s obviously a long process to launch. Our objective here is to get to a position where we do launch a fund that’s available to retail, but given the regulatory hurdles, we wanted to offer something to institutional and accredited to begin with.”
In addition to the new index fund, Coinbase also announced the launched the Coinbase Index.
This essentially tracks the performance of all of the digital assets listed on GDAX as a whole, providing a glance at the performance of the index fund compared to the assets individually.
The Coinbase index fund is now available to accredited investors for pre-registration. With Coinbase as one of the dominant exchanges for US investors, the launch of this index fund can attract a new wave of institutional investors into the cryptocurrency market.