The Case for Crypto Funds: Transparent, Less Expensive, More Diverse
Interest in crypto funds is on the rise — what are the hurdles to adoption?
Cryptocurrencies are upending the worlds of banking, retail and payments in countless ways, but there has been one area where this burgeoning industry has somewhat fallen behind: investments.
While it can be easy to build portfolios that focus on stocks and shares or fiat currencies, diversifying into crypto funds has proven harder for consumers and professionals alike. This has been partially because of how many financial institutions have been reluctant to embrace digital assets so far.
Another issue has been how portfolio managers in the crypto space have been struggling to share their strategies with the public. While a lack of infrastructure has played a role in this, the uncertain world of regulation and taxation is another factor that should not be discounted.
But interest in crypto funds is on the rise, according to one startup that enables users to create their own funds or follow those that have been established by others. Tokenbox says blockchain technology and smart contracts make sense for those who either want to invest in cryptocurrencies or tokenized versions of real-world assets, such as precious metals. Decentralization could pave the way for all parties to enjoy greater transparency and lower costs, while substantially simplifying record keeping and reducing the risk of falsification.
The company argues that tokenized funds broaden the class of assets that can be invested in and offer an entry point to qualified and smaller private investors simultaneously. Investments can be received in the form of fiat or crypto — and the ownership of shares can be proven in the form of tokens, which can be traded in authorized marketplaces. Automation would have the potential to deliver accurate updates on how a fund is performing far quicker and more precise than conventional methods.
A new approach
Through tokenized funds, traders can create smart contracts and issue ERC-20-compliant tokens, which equate to a single unit. This token’s value would rise and fall proportionally to fluctuations in the portfolio it tracks. Owners would have the freedom to buy, sell or store these units as they please.
Tokenbox says its platform delivers benefits for traders and investors alike. While portfolio managers benefit from software complete with built-in analytical tools — enabling them to test and execute a broad range of trading strategies — users get to browse a wide range of funds based on risk, with an at-a-glance look at how each of them have performed to date.
Rating systems are provided for each of the funds on the platform, and an integrated wallet is designed to make accessing cryptocurrencies and tokens as simple as possible. Every trader also undergoes mandatory due diligence checks, with the company aiming to demystify the process of registering compared with rival services that refuse to make their criteria clear.
A beta version of Tokenbox launched in the third quarter of 2018. Know Your Customer, or KYC, checks are completed via Telegram Passport, while a marketplace enables potential investors to assess the startups about to embark on fundraising drives.
The company is licensed in Estonia for enabling consumers to exchange fiat currencies for crypto, and for providing a multicurrency wallet. Its native utility token, TBX, is listed on several exchanges, and in November 2018, Tokenbox entered into a partnership with a United Kingdom-based platform that allows crypto coins and tokens to be bought instantly using debit or credit cards.
Tokenization may still be in an experimental phase, but the concept is slowly and surely beginning to go mainstream. From artwork to palladium, property to commodities, companies around the world are beginning to explore its potential. Tokenbox is now hoping to break down barriers further so this crypto-focused approach to investments can reach the masses.
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