The Digital Asset Index Fund launches on 28th August. Morgan Creek opts excludes any cryptocurrency holding more than 30 percent pre-mine.
The new fund is going to offer accredited investors, pensions, endowments, and other institutional investors the opportunity to achieve indirect exposure with Bitcoin, Ethereum and more eight other high market cap cryptocurrency assets. However, the company is not ready to take in Ripple and Stellar.
Currently, Morgan Creek includes eight cryptocurrencies to gain exposure. However, the fund will nonetheless deny the altcoins including Stellar $0.232413 (1.24%). Morgan Creek Digital partner, Anthony Pompliano says
If there is a central party owning 30% or more of supply, then we withhold those from the index.
— Michael del Castillo (@DelRayMan) August 28, 2018
This news follows a problematic trend especially for Ripple together with its XRP token $0.348815 (0.35%). The report of the previous week says that controversy continues to swirl after comment renewal from David Schwartz, the chief information officer.
David Schwartz called the network of Ripple more decentralized than Bitcoin as well as Ethereum. This is also applicable to tokens including TRON, NEO, and NEM, which could be under the exclusion by same grounds.
David Schwartz also specifies that Ripple was not a distributed ledger. The source report says this is also essential for the inclusion of an asset in the fund. Meanwhile, the concern is the security of the custody qualifications, the technical ability protection off-line and trade concentration limits. They have not stated it clearly whether ripple fails to meet their criteria.
The co-founder at Bitwise Asset Management, Hunter Horsley is liable to manage the fund, meanwhile continues the pre-mine narrative. He says,
With decentralization being a cornerstone of most blockchain designs, having a large portion of assets held centrally runs counter to that and could create complexities that differ from what we would expect from public blockchain. That is not for sure, it’s just a potential risk.
Pompliano sounds confident about the institutional investors’ interest in the fund. Regardless, the assets deemed securities or not. While Hunter Horsley reportedly confirms that the decision taken to exclude the pre-mined assets was made with concerns relating to potential fraud and manipulation. Alongside, the regulatory uncertainties are all over the tokens securities status with centralizing ownership.
The index fund of Morgan Creek includes
- Ethereum Classic
- Bitcoin Cash
These cryptocurrency assets will contain in the market-cap-weighted basket of funds and will be recalculated per month. In the next quarter, Bitwise auditor Cohen & Company will oversee the funds. The results annual publishing starts by early 2019.
Alongside, implying the restrictions on pre-mined coins, Morgan Creek is specifying trade concentration limits, custody qualifications, and cold storage requirements. This disqualifies the majority of cryptocurrency from considering the new fund.
Neither Cardano nor IOTA meets the cold-storage custody rule. On the second hand, Vechain (VET), which has large trading lists, Binance is unable to pass the exchange concentration rule.
According to the reports, the Gary Gensler, spring government regulator argues that Ethereum and Ripple could likely be deemed unregistered securities depending on their token pre-sales.
Image Source: Morgan Creek