Torus Kling Blockchain IFSC, an equal joint venture between financial management firm Kling Trading India and Cosmea Financial Holdings, is all set to launch Asia's first cryptocurrency exchange-traded fund (ETF), which will potentially go live by March 2022 in GIFT (Gujarat International Finance Tech) city.
The venture has already signed an MoU (Memorandum of Understanding) with BSE's international arm India INX to launch the country's first Bitcoin and Ethereum Futures ETF, along with being the first Asian Discount certificates tracking Metaverse Large Cap stocks in US and Europe markets, according to a report by The Economic Times.
The product will be traded on GIFT city's IFSC (International Financial Services Centre). Notably, this will be launched in a "sandbox" arrangement made possible by the International Financial Services Centres Authority (IFSCA), which is responsible for the regulation of financial centres within SEZs (Special Economic Zones).
Regulatory sandboxes usually refer to testing grounds for live trials of new products or services in the fintech space, which currently do not fall under any regulatory ambit, in a controlled environment and strictly controlled manner, with the intent of balancing product innovation and consumer protection.
As per V. Balasubramaniam, CEO of India International Exchange, a formal application to the IFSCA has already been made. "We will be launching products in these new-age assets in compliance with the prevailing laws after receiving all required post regulatory approvals", he added.
Torus Kling Blockchain, which will also take care of its global distribution, is targeting around $1 billion assets under management (AUM) in the first two years from customers participating in these blockchain-backed products through ETFs and Discount certificates.
This follows the suit of the US regulations, which permitted Bitcoin Futures ETF last year, while the Canadian financial regulatory authorities okayed Bitcoin and Ethereum spot ETFs to be listed on the Toronto stock exchange.
Crypto ETFs allow an investor to track cryptocurrency returns without having to invest in the digital tokens themselves, thereby circumventing the hassles and concerns associated with usual cryptocurrency exchanges. Future ETFs, on the other hand, are backed by futures contracts, which speculate on the volatile prices of cryptocurrencies in the market.
Global estimates suggest that the annual cryptocurrency derivatives trading volume stands at around $3.2 trillion, while the spot volume is approximately $2.7 trillion.
Post obtaining all regulatory approvals, Indian investments in the ETF will be streamlined through RBI's liberalised remittance scheme.
"Exchange trade products allow trading through regular investment accounts, bypassing the hassle and security concerns of cryptocurrency exchanges," added Krishna Mohan Meenavalli, CEO, Torus Kling Blockchain IFSC.