Although we are increasingly hearing about cryptocurrencies, investment options remain limited, due to the need to develop regulation that reduces risks for investors.
Currently there is only one instrument similar to an Exchange Traded Fund (ETF) related to this type of asset and another one is about to appear on the Bermuda Stock Exchange; while in Mexico it is not yet an investment option, as more progress is needed in the regulation of virtual currencies.
In an interview with MILENIO,the leader of the Fintech and Blockchain Initiative of the Business School of the Monterrey Institute of Technology and Higher Studies (ITESM),Miguel Angel Castro, explained that, as such, there is still no cryptocurrency ETF and there is only one thing nearby in the United States.
It is an investment fund that functions as an ETF, supported by a 1933 Act,which can only be acquired between institutions and is not for the general public.
What is an ETF?
It is a listed fund that represents the position of an asset or different types of assets under an investment fund, where the investor holds a share of that fund; i.e. the income obtained by the assets contained in that fund.
There are ETFs of fixed income, equity assets, of different types of indices that are listed on the stock exchanges and can be acquired through a stock exchange, which gives legal certainty. Instead, to access a cryptocurrency, an investor may access some platform, but it may not be regulated and subject to some form of fraud.
In Latin America, Brazil is working on the proposal for a cryptocurrency ETF and has already made progress in regulation, so it is planned to be leaving at the end of this year on the Bermuda Stock Exchange and the general public will be able to acquire it.
First regulation
Tec de Monterrey's specialist indicated that there are no initiatives for such instruments in Mexico yet, as the Bank of Mexico is still working on secondary regulation of cryptoactives,which would be authorized to operate in the nation; once secondary regulation is in place, the next step would have to be made to assemble an ETF related to a cryptocurrency that the Bank of Mexico has already authorized.
"There may be a lot of ideas, a lot of proposals, but legally there is still no process to say in December one is issued, in January another is issued," he said.
Miguel Angel Castro detailed that an investor, in any type of investment, has to understand thefunctioning of the market and the asset, because although an ETF is a regulated mechanism and gives legal certainty, that does not imply that the underlying asset itself does not involve risks and, in the case of cryptocurrencies,the market is too volatile and too risky.
He abounded that overnight, the price of the asset can range from 50 to 80 per cent and the fact that it is part of an ETF is not exempt from market risk.
"The risk lies in the volatility of the cryptocurrency represented by the ETF. There is nothing to help you value the price of a bitcoin, there is no value that supports it, without the acceptance of people interested in its supply or demand, that is why it is so volatile, you can have very high gains or losses," said the leader of the Fintech initiative and Blockchain of the ITESM School of Business.
