Malta-Based Fund Taps Into Distrust Of State Money With Bitcoin Tom Burroughes, Group Editor , London, 29 May 2013

As pretty much anyone in the wealth management industry knows - or should know - the basic requirement of any client is to preserve wealth. As far as some investors are concerned, a new virtual currency called Bitcoin is part of the solution.

Editor's note: This is one of a series of articles touching on wealth management firms in the jurisdiction of Malta. To view a recent interview with international law firm and fund services firm Maitland, click here.



As pretty much anyone in the wealth management industry knows - or should know - the basic requirement of any client is to preserve wealth. With the “financial repression” of negative interest rates, people have turned to gold, real estate, certain equities and esoteric fields such as fine art to do the job.

All these asset classes have drawbacks, however. Even gold, to take Man’s oldest safe haven asset, is not bullet-proof, as shown when President Franklin D Roosevelt confiscated private gold holdings in the 1930s. With that sort of drastic event in mind, today’s digital economy has come up with “Bitcoin”, a form of electronic, or virtual, money that is, its supporters claim, designed to replicate the scarcity of metal currencies without the tricky physical storage and handling issues. It has made headlines with a number of giddy price gyrations; it has also prompted worries from some commentators and regulators as to whether it could be misused by criminals. Bank of Singapore’s chief economist, Richard Jerram, for example, recently doubted whether Bitcoin will challenge global monetary systems. In May, US police froze the accounts of Mt Gox, the world's largest Bitcoin exchange, after claiming it was operating as an "unlicensed money service business." Bitcoin is controversial.

Last autumn, a Malta-headquartered "next generation brokerage company", Exante, launched the Malta-registered Bitcoin Fund enabling high net worth investors, among others, to hold units in Bitcoins. It is the first fund of its kind in the world. Gatis Eglitis, managing partner of Exante (Malta), told this publication about the fund when WealthBriefing visited his firm’s offices in St Julian’s on the Mediterranean island recently. (The firm has recently held its inaugural awards ceremony in Lisbon, Portugal.)

The decision to launch the fund was made because “we wanted to include Bitcoin in our multi-asset trading platform, but because it was not considered to be a real asset like stocks or futures. Being a regulated entity we had to think about the institutionalisation of it. Thus we came up with an idea to wrap Bitcoin within a hedge fund form and offer them to our customers electronically on Exante's multi-asset platform with one click,” he said.

Eglitis said the fund was considered as investment in technology and the technology has proven to be robust enough, having been around for three years. “We set up Exante to service our brokerage clients that would like to invest in FX, metals, futures, stocks, forwards, options, bonds, hedge funds and other financial products - all from one electronic online trading platform - from one account. Bitcoin fund was set up more like a project to expand our product offering,” he said.

Clearly, with concerns about central bank quantitative easing – in other words, money printing – the timing of the launch of such a fund is interesting. Despite recent pullbacks, the decade-long ascent of gold, for example, is ample proof of how concerned many investors have been about the eroding value of mainstream fiat currencies. (Since the gold link to the dollar was severed by Richard Nixon in 1971, the US currency has lost more than 80 per cent of its purchasing power.)

“For the last decade wealth preservation when working with HNW individuals has been a really hot topic. This is the reality,” Eglitis continued.

“We are very vulnerable in the world today,” he said, talking about the still-fragile nature of many banks’ balance sheets, high debts, and the worries about mainstream monetary systems. “The slightest problems happen and our security is gone,” Eglitis said.