A large proposed digital currency index fund is hoping to attract institutional investors keen to get exposure to the rapidly evolving digital asset space. However, the firm behind the index, Morgan Creek, plans to exclude virtual currencies that they deem to be too centralised.
Morgan Creek Fund Requires Listing to Exhibit a Level of Decentralisation
Morgan Creek announced the new fund earlier today. It will be provided by both the investment firm and their partners from Bitwise Asset Management – a California-based crypto investment startup.
The firm led by Mark Yusko stated that the index fund will be called Morgan Creek Bitwise Digital Asset Index.
The new fund will allow institutions exposure to the largest 10 cryptocurrencies by market capitalisation. However, those behind the idea are keen to avoid potential regulatory issues that could arise from pre-mined digital assets such as XRP. According to Business Insider, the founders of the Ripple network hold around 55% of all XRP tokens.
To clarify, XRP is the name given to the native currency on the Ripple network. It is used to perform some of its intended functions. Meanwhile, Ripple is the name of the payment network itself.
The new Morgan Creek fund will require that the companies behind crypto projects hold no more than 30% of the total supply of their coins. The head of the firm’s crypto unit, Anthony Pompliano explained:
“A large centralised repository, increases threat vectors, governance issues, regulatory issues… By removing those type of assets from the index, you drastically reduce the risk that investors are exposed to.”
The main concern from the point of view of Morgan Creek Digital (the firm’s cryptocurrency wing) is that federal regulators may deem tokens whose founders hold large repositories of said digital currency a security. However, Ripple’s Brad Garlinghouse has stated previously that he believes XRP should not be classified as such by the SEC.
Earlier this year the U.S. securities regulator stated that neither Bitcoin or Ether were to be classified as a security. The regulator is yet to classify any of the other 1,600 or so coins and tokens in existence today.
It is believed that the new index fund will charge 2% in managements fees for their services. Pompiliano also states that Morgan Creek is looking to attract institutions to invest in the Morgan Creek Bitwise Digital Asset Index. Those named include endowments, pensions, sovereign wealth funds, and foundations.
Morgan Creek currently manages funds in excess of $1.5 billion for its clients. Earlier this year, they acquired a North Carolina-based firm interested in investments focusing on cryptocurrencies called Full Tilt.
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