- FINMA approves the first crypto index fund in crypto-friendly Switzerland.
- Approval presents a big win for the cryptocurrency market.
The Swiss Financial Market Supervisory Authority (FINMA) announced Wednesday the approval of the first regulated Crypto fund in Switzerland.
The fund which is restricted to qualified investors invests primarily in so-called crypto-assets.
According to FINMA, crypto-assets entail all assets based on blockchain or distributed ledger technology (DLT). Crypto Index Fund is categorized by Swiss financial laws under “other funds for alternative investments” and considered to carry “particular risks.” As such, its distribution will be reserved for qualified investors licensed by FINMA to offer Crypto products.
FINMA’s approval is conditional
FINMA said the approval of the Crypto Index Fund is aimed at facilitating serious innovation in the country. The approval process also involved applying existing rules concerning financial market laws in a “consistently technology-neutral way.”
By considering existing rules, FINMA said it helps protect the financial market from manipulation by circumnavigating the law, where new technologies are involved. The risks leading to the conditional approval gave rise to some restrictions that will help to protect the financial market participants while allowing innovating, FINMA clarified.
For instance, FINMA will only approve investment in established crypto assets with significant trading volume like Bitcoin. Additionally, only firms registered under the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, will be allowed to invest.
Switzerland is a top destination for cryptocurrency investors due to its crypto-friendly environment. The approval comes few months after Swiss multinational bank UBS Group expressed intentions to offer high profile clients exposure to cryptocurrencies.
The move marks a milestone for the progressive Swiss regulatory and financial market and a step towards approving a Crypto ETT. Other European regulators have also made crypto-friendly regulations to foster crypto investments. In July, Germany opened the doors for over 4,000 institutional funds to invest 20 percent of their portfolios in Crypto assets.
In the US, the Office of the Comptroller of the Currency (OCC) issued conditional approval to US banks, allowing them to hold and make payments with cryptocurrencies. This was a significant step for the federal government since most cryptocurrency laws are being passed individually at the state level.
Crypto index funds foster crypto adoption.
Crypto index funds are mutual funds specific to the crypto market with a portfolio that reflects a market index. They enable diversified holdings and are managed or run by licensed investment firms.
The funds provide retail and institutional investors with an easier and cheaper way to invest in the cryptocurrency market. For instance, Crypto index funds are tradable on the traditional market like securities or stocks. They also don’t require investors to hold the underlying crypto assets.
The cryptocurrency community always applauds the approval of crypto-focused funds as they provide new investment opportunities and increase crypto adoption and education.
Most Cryptocurrency index funds track the top 20 biggest crypto assets by market cap. Some existing crypto index funds in other jurisdictions include Invictus Capital’s Crypto 20 Index Fund, the Grayscale Index Fund, the S&P Bitcoin Index, the S&P Ethereum Index, CMC’s Indices, and the Bloomberg Galaxy Crypto Index.