Bringing you live news and features since 2006 

The Winklevoss’ trust fund will be bad for Bitcoin, says ex-BlackRock MD

RELATED TOPICS​

Professor Jon Rushman, an ex-BlackRock managing director, believes the Winklevoss twins’ attempt to build the first exchange-traded product (ETP) in Bitcoin will harm the virtual currency’s quest for acceptance.

Cameron and Tyler Winklevoss, whose claims that Mark Zuckerberg stole their idea for Facebook was the subject of hit movie The Social Network, reportedly hold USD10m (GBP6.5m) of Bitcoin and have filed paperwork to create an ETP that will track the price of the virtual currency, which is traded over the internet independently of governments and monetary authorities.
 
The pair have set up The Winklevoss Bitcoin Trust and plan to sell USD20m (GBP13m) of shares to investors. The shares will offer exposure to the yo-yoing price of Bitcoin with, the twins claim, minimal credit risk.
 
But Professor Rushman of Warwick Business School (pictured) feels neither investors nor the Bitcoin movement will be well served by the twins’ plans.
 
“It is not going to help Bitcoin’s quest for respectability to have associations with such thoroughbred vulture capitalists,” says Rushman, who worked at BlackRock and Barclays Global Investors before moving into academia and teaching finance. 
 
“The less people think of Bitcoin as a ‘get rich quick’ investment, the better its chances of survival.  For its own sake, it needs publicity for its qualities as a neutral and universally accessible currency with a transparent exchange rate and immunity from central bank manipulation.
 
“If the ETP goes ahead, it will be interesting to see how many investors it attracts as it would seem that anybody keen on Bitcoin as an investment will already hold them. Why would someone want a security offering all the same risks as the Bitcoin, but with an extra layer of management and fees inserted? Even the justification that it is possible to short-sell the proposed ETP looks flimsy, given that one can already short the Bitcoin in the forward exchange market.”
 
The virtual currency has become progressively more popular since the financial crash and its proponents say it will revolutionise banking. It is created by the application of a mathematical formula and was invented four years ago by a person or group using the name Satoshi Nakamoto. The price of Bitcoin, which is limited to 21 million in circulation, has swung between USD14 and USD266 this year.
 
Rushman believes the proponents of Bitcoin should concentrate on gaining acceptance among regulators if it is to take hold in the world permanently.
 
“None of the US regulatory authorities have figured out how to regulate Bitcoin, as it breaches barriers in our understanding of what a currency is,” says Rushman.
 
“It is certainly tainted by some speculation that it is used by the criminal underworld, but it is hard to find any evidence that criminals use it more than any other currency.
 
“Bitcoin needs to work harder on explaining its philosophy and on regulation, they need to do a bit of a charm offensive with the regulators and make them comfortable with it while being true to their principles.
 
“I think Bitcoin or something like it has a real place in the future. Imagine a world where foreign exchange and monetary policy doesn’t exist, and there is no inflation. Society would be free to use all the talent currently directed to these issues elsewhere. Meanwhile, governments could still raise taxes and borrow but without uncertainty as to the unit of account.
 
“That seems far-fetched at the moment, but in an ideal world it could happen. Bitcoin is just another medium of exchange. In the same way that the Euro crosses national boundaries and greatly simplifies real trade in continental Europe, cyber currencies like Bitcoin can do the same globally, without the need for a central bank.”

Latest News

European ETFs raised USD47.8 billion in Q1, a 15 per cent increase compared to the same period in 2023, according..
LSEG Lipper’s March report finds that globally equity ETFs (+EUR113.2 billion) enjoyed the highest estimated net inflows for the month,..
Morningstar has published a review of the European ETF market for the first quarter 2024, which finds that it gathered..
ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..

Related Articles

Kristen Mierzwa, FTSE Russell
Index Investments Group (IIG), a division within index provider FTSE Russell, has extended its range of indices through two new...
ETFs
US ETF issuers of active ETFs are facing an increase in fees from the big custodian firms, such as Charles...
Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by