Tuesday, July 19, 2016
First Ether ETF Filed With the SEC is Not Offering Insurance
As competition heats up amongst Bitcoin ETF providers SolidX and the Winklevoss Twins, another contender emerged to establish an exchange-traded fund based on a digital currency.
Recently found company called EtherIndex LLC officially filed with the Securities and Exchange Commission on July 15 to offer the public and conventional investors opportunities to invest in Ether, the underlying currency of smart contract-based decentralized platform known as Ethereum.
Similar to existing public digital asset trade and investment tools such as Grayscale Investments’ Bitcoin Investment Trust and the Winklevoss Bitcoin Trust, Etherindex LLC’s Ether Trust offers investors with shares which represent interest in the net assets of the Trust.
“The Shares represent units of fractional undivided beneficial interest in the net assets of the Trust,” a section of the official SEC filing states.
However, like the Winklevoss Bitcoin Trust, investors or buyers of the shares in EtherIndex Ether Trust will not be insured by the Trust for potential loss or theft of Ether. The Trust explains that investors must understand the risk in purchasing digital currencies like Ether and consider the possibility of loss, damage, theft, and restriction on access.
“The Trust’s ether may be subject to loss, damage, theft or restriction on access. There is a risk that part or all of the Trust’s ether could be lost, stolen or destroyed, potentially by the loss or theft of the private keys held by the Custodian associated with the public ether addresses that hold the Trust’s ether,” says the EtherIndex team.
“The Trust will not insure its ether. The Custodian will maintain insurance with regard to its custodial business on such terms and conditions as it considers appropriate in connection with its custodial obligations and will be responsible for all costs, fees and expenses arising from the insurance policy or policies,” they continued.
Historically and statistically, ETFs have premium prices over the actual digital currencies. It has been seen in Grayscale Investments’ Bitcoin Investment > Trust and other existing public ETFs. One major reason investors are willing to pay a premium to these establishments and companies is to not deal with security or technology-related issues.
The Ethereum foundation declined to comment to Forbes, the first network to report on the story.