Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETF

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETF

Finance has confirmed that the exchange-traded product tracking an index of five leading cryptocurrencies will start trading on Switzerland’s principal stock exchange on Nov. 21. The exchange has also confirmed that this product is not an exchange-traded fund (ETF). The country’s financial regulator, Finma, explains the differences.

Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space

Differences Between ETPs and ETFs

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETFThe news of the cryptocurrency exchange-traded product (ETP) by Zug-based Amun AG having been approved by Switzerland’s principal stock exchange, Six Swiss Exchange, spread throughout the crypto community over the weekend.

The product tracks an index of five major cryptocurrencies: BTC, XRP, ETH, BCH, and LTC. While Amun’s website refers to this product only as an ETP, some believe that it is an exchange-traded fund (ETF).

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETFETPs and ETFs are two different products, listed under different categories on Six Swiss Exchange.

A spokesperson from Finma, Switzerland’s financial regulator, told

It is important to separate ETPs from ETFs, as ETPs are not subject to the Collective Investment Schemes Act (Cisa) and are therefore not supervised by Finma.

Noting that ETFs “are funds that are traded on an exchange and normally track the performance of an index,” he emphasized that “In Switzerland, these products are subject to the Cisa.”

A spokesperson from Six Swiss Exchange also confirmed to that Amun Crypto is an ETP, not an ETF, adding that the product will start trading on Wednesday, Nov. 21. The exchange clarified:

ETPs are collateralized, noninterest-earning bearer debt securities which replicate an underlying [asset] (generally from the commodities sector), either on a regular or leveraged basis. Like ETFs, they trade in a multi market-making segment, but in legal terms they are not funds.

ETFs, ETPs and ETNs

On its website, Six Swiss Exchange detailed different types of “passive financial products in Switzerland.” The first two on the list are ETF and ETP.

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETF

The document indicates that ETPs include exchange-traded notes (ETNs) and exchange-traded commodities (ETCs). ETNs are a type of debt security that trades on exchanges and promise a return linked to a market index or other benchmark. ETCs also trade on exchanges but provide exposure to commodities and commodity indices.

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETFFurthermore, ETFs and ETPs also carry different risks. “ETFs are separate pools of assets,” Swiss Funds and Asset Management Association described in its report on ETFs and Index Funds. “In the event of the insolvency (bankruptcy) of the provider (e.g. the fund management company or custodian bank), the assets and rights of the ETF can be segregated, and there is no issuer risk in this regard.” Debt securities, however, “often entail an issuer risk that is hard to calculate,” the report author noted.

Public Misunderstanding Led to Trading Suspension

Swiss Crypto Exchange-Traded Product Launching Nov. 21, but It’s Not an ETFXBT Provider’s exchange-traded products have also been misunderstood by the public.

In September, the U.S. Securities and Exchange Commission (SEC) temporarily suspended trading of the company’s products — Bitcoin Tracker One and Ether Tracker One — due to the inconsistencies of their descriptions.

The commission wrote:

The broker-dealer application materials submitted to enable the offer and sale of these financial products in the United States, as well as certain trading websites, characterize them as ‘exchange traded funds (ETF)’ … Other public sources characterize the instruments as ‘exchange traded notes (ETN)’.

In addition, the SEC noted that “the issuer characterizes them in its offering materials as ‘non-equity linked certificates’,” which “are not principal protected” and “do not bear interest.”

Citing “a lack of current, consistent and accurate information” of the two investment vehicles which resulted “in confusion amongst market participants regarding these financial instruments,” the SEC justified its decision to suspend their trading.

What do you think of Amun Crypto ETP trading on Six Exchange? Let us know in the comments section below.

Images courtesy of Shutterstock, Six Swiss Exchange, and Finma.

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Tokens Plummet 15-20% Following SEC’s Crackdown on ICOs, Dark Days Ahead

A broad selling action in the cryptocurrency market today saw ICO coins losing 15 to 20 percent of their value. And the sentiment is likely to extend thanks to the U.S. Securities and Exchange Commission (SEC).The U.S. regulator at the beginning of this month charged the founder of a decentralized exchange (DEX) EtherDelta on accounts of enabling the trade of unregistered securities. The Exchange until this time was available to investors as a source of liquidity for the ICO tokens.Its “decentralized” status allowed ERC20 projects to list their assets without regulatory approval, but the SEC’s crackdown has closed their doors effectively. For the regulator, the creator of a smart contract-enabled exchange would also need to register its work with the authorities. And whatever asset these exchanges would list on their trading platforms, would have to get a securities license as well.The news sent shivers across the lower market cap coins, each registering huge daily losses on the top of what they had already lost amidst the Bitcoin Cash fork. Loopring, for instance, dropped 19.11% against the U.S. Dollar on Monday, followed by Maker, Self, and ICON that also noted steep drops in their value.SOURCE: CoinMarketCapRelated Reading: Ethereum Plunges 12%: Will ICOs Continue to Drag ETH Down?DEX, ICO Industry in TroubleThe SEC decision has led the crypto community to believe that the regulator would target more exchanges in the future.It has been warning about the potentially unlawful trading platforms for trading crypto assets already. The EtherDelta case particularly has validated that even exchanges without a central authority in place could land their developers in trouble. Zachary Coburn, the creator of EtherDelta, became a test study after he agreed to settle and pay a total of $388,000 in penalties, disgorgement, and interest.The impact of the SEC’s crackdown can affect developers in the longer term, especially those who are U.S. residents. While it is true that the regulator cannot stop a DEX from running online, they are still able to hold someone liable for beginning the trading platform at fault. Therefore, the only way a DEX developer can avoid punishment or a fine is by moving to locations with no U.S.-treaties. It sounds good on paper but, in reality, it would not be feasible.The only option these developers are left with is to go anonymous. But that doesn’t always work.As far as the ICO industry is concerned, the backers of the now-listed assets have two options: either get a security license or unpin the U.S. from their crypto market map. In the near-term it could disallow U.S. residents to trade the unlicensed digital assets that the SEC deems as securities, provoking them to sell-off.“I read this as the SEC laying the groundwork to prosecute ICOs directly for failure to register under the Securities Act, which they still haven’t done so far (except for blatant Ponzi & scams),” said Jake Chervinsky, a lawyer at U.S.-based Kobre & Kim agency. “If you launched an ICO after the DAO Report, you might be in the line of fire.”Featured image from Shutterstock.

SEC Shares New Thoughts and Ideas Regarding Crypto Regulation

The Securities and Exchange Commission (SEC) has released a public statement regarding crypto asset trading and the companies that issue such assets.

Blockchain Has Ups and Downs

In the statement, the SEC explains that while they acknowledge the benefits of technological advancements like blockchain, they’ve had specific impacts on the trading market that ultimately require companies dealing in the technology to adhere to certain rules. The notice reads:

The Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets (the “Divisions”) encourages technological innovations that benefit investors and our capital markets, and we have been consulting with market participants regarding issues presented by new technologies. We wish to emphasize, however, that market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies such as blockchain.

Where Do These Issues Come From?

The notice then proceeds to explain that most of the issues affecting the trading market in a not-so-positive way stem from three specific projects. The first is initial coin offerings, or ICOs. The second is companies or investment projects that center around cryptocurrencies or that try to get others to invest in them, and third is the “secondary market trading of digital assets.”

The notice then discusses some of the legal action it has taken against companies that have not adhered to the body’s registration processes or that have attempted to offer trading behind “closed doors” without proper supervision. Some of these companies include EtherDelta, AirFox, Paragon, TokenLot LLC and Crypto Asset Management.

This Is Good, People!

The SEC assures that the registration processes it has in place are designed to keep customers safe and their privacy intact. The idea is to protect customers and their money from those who do not play by the rules or who engage in illicit activity.

While it’s easy to jump into negativity and assume the SEC isn’t being open-minded, it can also be said that the organization recognizes the growing crypto market as a valid trading enterprise. Therefore, it is aiming to protect and oversee the arena as they would with stocks or bonds. More rules often mean that the market is expanding and becoming mainstream, and with more participants at the helm, the SEC wants to ensure these participants are shielded from the problems that often come with investing.

In many ways, rules and regulations signify a positive change in the market; that more people are trading, and thus require appropriate protections.

Do you agree with the SEC’s legislation regarding the crypto market? Post your comments below.

Images courtesy of ShutterStock

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