Coinbase, the largest cryptocurrency exchange in the U.S., is moving into asset management with the launch of Coinbase Index Fund, a fund for cryptocurrencies. Through the new fund, the customers can buy four top digital coins including bitcoin listed on Coinbase, instead of trading them directly on the exchange.
The index fund will invest in the same cryptocurrencies traded on Coinbase and its institutional exchange GDAX, that include Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. The fund requires a minimum investment of $10,000, and it would charge a flat 2 percent annual fee. The fund will accept investments in U.S. dollars as well as in cryptocurrency.
The Coinbase Index Fund will be under a new unit called Coinbase Asset Management. The fund will be available only to U.S. accredited investors for regulatory reasons, for those who have annual income of at least $200,000 or a net worth of at least $1 million.
Meanwhile, the San Francisco-based startup is expected to launch a similar fund available to all investors without wealth limit that would be structured as an exchange-traded fund or ETF.
Reuben Bramanathan, product lead for the Coinbase Index Fund, said, "The first version of this fund for regulatory reasons will be limited to US accredited investors, but as we build more funds we'll make them available to US retail investors."
Among others catering to accredited US investors, Bitwise Investments's fund launched last year holds 10 cryptocurrencies and charges 2.5 percent annual fee. Early this year, a group of ex-Goldman Sachs employees started a fund holding 20 digital currencies.
Meanwhile, the Securities and Exchange Commission is taking strict stand against selling such products to retail investors and had rejected approval for Bitcoin ETFs earlier.
Dalia Blass, director of the SEC's investment management division, reportedly said that a number of significant investor protection issues need to be examined before offering these funds to retail investors.
In a separate development, Coinbase last week was hit by two class action lawsuits. In the first lawsuit, filed on March 1, the plaintiffs accused that the employees of the California-based exchange illegally profited by insider trading of the Bitcoin Cash launched in December. The second class action lawsuit, filed on March 2, accuses Coinbase of both violating California's Unclaimed Property Law and conducting unlawful and unfair business practices.
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