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Winklevoss Bitcoin Trust Brings Bitcoin To Mainstream Investors

The Winkelvoss Bitcoin Trust, to be headed by Cameron and Tyler Winkleveoss, would sell around $20 million worth of shares, each representing a fraction of a single Bitcoin, if the plan came to fruition. First, it must be approved by the US government.

Cameron and Tyler Winklevoss played a role in the development of Facebook. On Monday, they filed their proposal with securities regulators on Monday that would allow any investor to trade bitcoins, as if they were stocks.  The plan entails an exchange-traded fund, which typically tracks a basket of stocks or a commodity, but in this case would hold only bitcoins.

The Winklevoss Bitcoin Trust could send digital money from the realm of computer programmers, internet entrepreneurs and a small circle of professional investors like themselves into the hands of retails investors – virtually anyone with a brokerage account.

“The trust brings bitcoin to Main Street and mainstream investors to bitcoin,” said Tyler Winklevoss, co-founder of Math-Based Asset Services, which would operate the proposed fund. “It eliminates the friction of buying and reduces the risks associated with storing bitcoin while offering similar investment attributes to direct ownership.”

The Winlevoss have enlisted considerable help in their pursuit of the Trust, as Kathleen Moriarty, a lawyer at Katten Muchin, who played a leading role in the creation of the first exchange-traded fund and popular gold-and-silver-backed ETFs.

Even if the SEC approves a such fund, the twins would face major challenges.

“There are so many ways it could go wrong,” said Ugo Egbunike, a senior specialist in exchange-traded funds at the data company Index Universe.

But, the Winlevoss twins’ are confident.

“We have assembled a team that has successfully launched novel products before, and we firmly believe in the chances of success for this product,” he said.

“The value of bitcoins is determined by the value that various market participants place on bitcoins through their transactions,” the brothers’ filing says.

The Winklevoss fund would buy one bitcoin for each five shares, making the value of a single share worth approximately a fifrth of a single bitcoin. Trading desks would handle the daily buying and selling.

But, there are big issues individuals sees with the crypto-currency. As FT’s Alphaville writes:

So here’s an ETF which promises to create $20m worth of liquid exposure to an arguably illiquid crypto-currency by relying on the cooperation of broker-dealers making riskless profits through arbitraging fractions of the virtual coinage.

 

 

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