Winklevoss Twins Plan First Fund For Bitcoins

quote:

---

Bitcoin has been promoted as an alternative crypto-currency that exists outside the realms of governments and central banks. Now, two backers of the digital money are seeking to bring bitcoin into the investing mainstream — if they win the approval of the United States government.

Cameron and Tyler Winklevoss, the twins best known for their part in the history of Facebook, filed a proposal with securities regulators on Monday that would allow any investor to trade bitcoins, just as if they were stocks. The plan involves an exchange-traded fund, which usually tracks a basket of stocks or a commodity, but in this case would hold only bitcoins.

It is part of a broader effort to remove the stigma hovering over bitcoin and other online money endeavors, which have faced a barrage of regulatory questions and enforcement actions. Recently the world’s largest trading exchange for bitcoins, Mt.Gox, filed with the Treasury Department to register itself as a money services business and comply with money-laundering laws.

The proposal from the twins, who already have sizable bitcoin holdings, is an audacious one: the Winklevoss Bitcoin Trust could send digital money from the realm of computer programmers, Internet entrepreneurs and a small circle of professional investors like themselves into the hands of retail investors — virtually anyone with a brokerage account.

“The trust brings bitcoin to Main Street and mainstream investors to bitcoin,” said Tyler Winklevoss, co-founder of Math-Based Asset Services, which would operate the proposed fund. “It eliminates the friction of buying and reduces the risks associated with storing bitcoin while offering similar investment attributes to direct ownership.”

Their proposal has the advantage of coming from the desk of Kathleen Moriarty, a lawyer at Katten Muchin, who played a leading role in the creation of the first exchange-traded fund and popular gold- and silver-backed E.T.F.’s.

But it is far from certain that securities regulators will approve. Even if they do, such a fund would face major challenges, including the current bottlenecks that stop bitcoins from being easily bought and sold.

“There are so many ways it could go wrong,” said Ugo Egbunike, a senior specialist in exchange-traded funds at the data company Index Universe.

On Monday, several market participants suggested that the proposal was a long shot that was merely an attempt to legitimize the digital currency. But Cameron Winklevoss expressed confidence that regulators would bless the new investment.

---