Fund offers play on virtual cash

Educating financial advisers needed

It’s a matter on which seemingly everybody has an opinion — and those opinions are diverse.

Jamie Dimon, head of JP Morgan Chase, the world’s largest non-Asian bank by assets, has called it a fraud and noted if people are “stupid enough to buy it,” they will pay the price for it “in the future.”

Recently, Dimon termed the various digital currencies a “novelty” and claimed they are “worth nothing,” a comment that drew a swift rebuke from the founder of BitOasis, the Middle East’s largest crypto-currency. Given that crypto-currencies are here to stay, Dimon needs to get educated before making such statements, said the founder.

But Mark Cuban, owner of the Dallas Mavericks, who is not convinced bitcoin will be a “revolutionary asset,” seems to have had a change of heart. Last week he said: “if you’re a true adventurer,” and really want to throw the “Hail Mary, invest 10 per cent of your savings in bitcoin or ethereum.”

One week back, Christine Lagarde, head of the IMF, said it’s time for the world’s central banks and regulators “to get serious about digital currencies” because risks are being taken by “not understanding emerging financial tech products.”

Closer to home, David McKay, Royal Bank’s chief executive, said recently “there are some real concerns about how the bitcoin is being used that we have to resolve,” adding “fraud” isn’t one of them.

Meanwhile in the world of bitcoin — the best-known crypto currency — the price hit an all-time high last Friday when it closed at US$5,973. It started 2017 at US$952 and in volatile trading closed Monday at $US5,972 — a level that means a market cap of about US$100 billion. Some have called the price surge a “bubble,” while others says it is caused by usage and hoarding.

Now Canadian accredited investors are getting a chance to purchase units in the country’s first institutional-quality investment portfolio that offers a diversified exposure to the world’s top crypto currencies. The three main crypto currencies are bitcoin, ethereum and litecoin.

Investors in the fund — known officially as 3iQ Global Cryptoasset Fund — will also gain access to active managers in the crypto-digital space. The fund is expected to be launched later this week. It will not be listed.

The fund, whose objective is capital appreciation, represents two years of work for Fred Pye, the chief executive of 3iQ Corp. the fund’s manager.

And Pye, a financial services industry veteran, is aware of the extensive education job needed.

“Our priority is to work with investment advisers to make sure they understand it. They have to be prudent and skeptical, but if this is the single largest change in their lifetime, they have to participate,” said Pye. He said the first step to understanding is the recognition that one doesn’t understand bitcoin, with the final step being the realization that understanding is a “moving target.”

Part of that education will be bitcoin’s inner workings, including how the new supply of bitcoins is created, and its linkage to blockchain (or the bitcoin network).

So why launch such a fund? It flows from Pye’s firm belief that digital currencies “are here to stay.

And that the Pandora’s box is open. The concept of moving currencies or money around the world, instantaneously around the world, securely and for free, is a great idea.”

For Pye, the only issue is the size of the market. “We don’t know (how big it will be) but if you are under 30 and living in Venezuela you are certainly not owning any Venezuelan currency,” a situation he extends to citizens of other countries.