There is no denying the colossal rise of crypto coins in the past few years. Trading the blockchain based alternative to money has given rise to the entire fintech boom. Yet, cryptocurrency is still largely in the shadows as far as the mainstream goes. Yes, the public might have heard about the Bitcoin digital currency, but are they actively engaging with it?
Coinbase looks to change this through the development and setting up of an exchange traded fund (ETF) for cryptocurrency. Despite others failing to achieve this in the same area, Coinbase is confident to learn from their mistakes in order to bring cryptocurrency to Wall Street. But will it work?
What is Coinbase Planning as the Next Move in Cryptocurrency?
Some consider the move a part of Coinbase’s attempt to appeal to retail investors who desire cryptocurrency to be less of a volatile sector and more of a standard institution. However, the very nature of crypto coins, and the features that make them unique as an alternative to digital payments make this difficult. Digital currency exchange Coinbase currently acts as one of the world’s largest cryptocurrency exchange operators, allowing traders – predominately institutional investors – to use its platform to exchange cryptocurrency – from Bitcoin (BTC) to Ethereum (ETH), Ripple (XRP) to Litecoin (LTC). The move towards as ETF will mean the door is opened for a wider range of traders and investors – including those in retail.
What Benefits Would Cryptocurrency Have as an ETF?
An ETF means that an investor will be able to invest without owning the asset. ETFs are critical for Wall Street in terms of adoption of a concept. Investment firm BlackRock, who currently manages more than $6 trillion in assets, is offering advice to Coinbase from its blockchain division. BlackRock has experience setting up and managing ETFs. But it won’t be plain sailing for Coinbase.
The Securities Exchange Commission (SEC) rejected nine applications for similar feats in one day – including one by popular tech giants the Winklevoss twins. In retaliation, the twins created the Virtual Commodity Association (VCA) in an attempt to satiate the SEC by showing that cryptocurrency could be regulated in some ways. This move, though, throws into question the very nature of cryptocurrency and its deregulated nature.
Currently, the cryptocurrency revolution looks a lot less volatile than it has done in the past. While this is largely due to the smoothing out of the rocky road it has fared so far, it is in part also due to its acceptance as a form of currency to be used for online and offline payments. Not only have the majority of countries accepted cryptocurrency, but many are attempting to make it easier to invest in and trade with. Allowing digital currencies on Wall Street as an ETF would mean that cryptocurrency gains the final level of acceptance, which in turn could help mitigate against the volatility issues.
Cryptocurrency has an advantage of being untied to exchange rates and financial ties to the economy – unlike fiat currency – so it should be a more attractive investment for many. If it gains its place as an ETF, that could be the final move in establishing cryptocurrency in our mainstream lives.