JPMorgan opens crypto-proxy basket, enables indirect investments for non-crypto firms

JPMorgan’s latest investment product, a crypto-proxy basket meant for the U.S. market, provides its clients an indirect and yet viable means of accessing cryptocurrencies such as Bitcoin. The finance house’s notes mature on May 5th next year, with a minimum cost of US$1,000, with a Basket Deduction (fee) of 1.5% exclusive of the maturity price.

The findings on JPMorgan’s new investment product were initially disclosed through a report from Forbes. The firm’s notes, according to the report by Nina Bambysheva, provide a way of circumventing current U.S. regulation, allowing the method to represent an ETF holding 11 unequally weighted reference stocks. Investors can simulate the note by buying with a brokerage without commission fees. Based on a recent U.S. SEC filing, the “Insight Notes” linked to the JP Morgan basket represent American depository shares of 11 U.S.-listed companies categorized as operating in relation to cryptocurrencies or other digital assets. 

This categorization includes bitcoin holdings, cryptocurrency technology products, cryptocurrency mining products, digital payments, and/or bitcoin trading. The unequal weight of these reference stocks were determined by the U.S. SEC based on each unit’s relative exposure to bitcoin, as well as their correlation to bitcoin and liquidity. The commission warns potential investors, however, that (JP Morgan’s crypto exposure basket) “may be subject to extreme price volatility and rapid and substantial decreases in price over the term of the notes,” adding that investors should be “willing to lose some or all of their principal amount at maturity” should the basket decline or fall flat pending maturity in 2022.

Current crypto regulatory and compliance frameworks set by the U.S. Securities and Exchange Commission indicate that a cryptocurrency-backed ETF (Exchange Traded Fund) is not yet approved for its market. In a recent report by CryptoDaily, it was detailed that the notes provided by JPMorgan will thus depend on the market performance of its four Reference Stocks: Class A common stocks from top Bitcoin and crypto asset purchasers such as MicroStrategy and Square, which hold 20% and 18% respectively, as well as the common stocks by Riot Blockchain (15%) and NVIDIA Corporation (15%).

Of the four reference stocks listed by JPMorgan, MicroStrategy and Square have notably poured in significant amounts of investments from their respective balance sheets, with MicroStrategy’s holdings valued at around $5.1 billion, and Square’s holdings valued at over $453 million, according to data from BitcoinTreasuries.org, a project operated by @NVK on Twitter. Current corporate investments on crypto from technology companies include PayPal, AMD, and Tesla, among others.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.