DigitalX (ASX: DCC) is back trading on the ASX after coming out of a self-imposed trading halt.
The reason for short-lived market hibernation was the launch of its newly-founded investment division and “crypto-asset” investment fund, DigitalX Investments, to be led and managed by former Goldman Sachs Associate Director Tim Davies.
As an emergent fintech provider, DigitalX has made headlines in recent months after netting several high-profile corporate advisory clients linked to the growth of cryptocurrencies and their associated initial coin offerings (ICOs).
Its activities and market achievements have seen the company’s value swell to almost A$100 million by market capitalisation, framed within the larger interest in distributed ledger technology (DLT) and blockchain-powered services.
As its maiden crypto-fund (and one of the first of suchlike funds anywhere in the world), DirectX says it will invest predominantly in “leading cryptocurrencies, with a smaller allocation towards special trading opportunities including ICOs”.
The wider purpose of the fund is to provide investors with access to a portfolio of cryptocurrencies although DirectX admits it intends to include cash holdings, derivatives of cryptocurrencies and managed investment schemes in the fund.
“We believe cryptocurrencies are under-researched by mainstream asset managers and there is an opportunity to leverage our expertise in blockchain technology and crypto-asset investment to create value for our clients,” said Leigh Travers, managing director of DigitalX.
“DigitalX continues to aim to be a leading player in the crypto-asset space in Australia and has to date built extensive experience within its team managing crypto-assets and understanding the protocols behind different crypto-assets, including currencies and tokens.
“This initial small step into funds management can hopefully lead to a growth in our portfolio and strengthening of DigitalX’s ongoing revenue streams in this space,” said Mr Travers.
Here comes the cavalry
The dawn of cryptocurrencies and the associated commercial opportunities has attracted an almost immediate response from regulators.
In Australia, ASIC has set to work developing an appropriate regulatory framework to deal with the sudden emergence of cryptocurrencies, and now, one of the first instances of a “crypto-asset fund”.
ASIC published “Information Sheet 225 on Initial Coin Offerings” in October last year to provide guidance on the relevance of their existing securities and financial services laws with regard to ICOs and crypto-assets.
Given the tightening of regulatory oversight including China’s recent ban on ICOs altogether, ASIC states that crypto-assets are “subject to potential change” and that crypto-assets, “like other monetary products, are subject to anti-money laundering and counter-terrorism funding legislation”.
To be suitably regulated in its activities, from a regulatory oversight perspective, DigitalX has opted to work with Boutique Capital, an authorised representative of Grange Capital Partners, an ASIC-regulated Australian investment company.
DigitalX will hold a 73% interest in DigitalX Funds Management and intends to seed the fund with approximately $750,000 from its existing Bitcoin and Ethereum asset base.
According to DigitalX, Boutique Capital will be paid a management fee of 2% per year of the net asset value of the fund and will be entitled to receive a performance fee upon the achievement of certain performance criteria for the fund.
In the News
In further news, and potentially to substantiate its rapid emergence as a serious cryptocurrency market participant, DigitalX has announced it will participate in a joint-venture with digital media company Multiplier to launch a new crypto business news website and online cryptocurrency education platform.
According to its management, the move is designed to propel DigitalX to becoming “the authoritative source of information for well-educated and sophisticated new entrants to cryptocurrency markets”.
The pair plans to launch two new websites that will cover various breaking news and provide insightful commentary of the crypto-industry: Multipliercrypto.com and Coin.org will be launched soon with both DigitalX and Multiplier owning 50% each in the joint venture.
Coin.org will provide information designed to educate the market about Blockchain and crypto assets. This will include curated video content delivered by industry experts and highlight how to safely buy, sell and store cryptocurrency assets.
In parallel, Multipliercrypto.com will be a digital news network for businesses within the Blockchain and cryptocurrency ecosystem.
“DigitalX is excited to be partnering with Multiplier to launch these strategic websites. These sites will be a platform to educate new investors from around the world about the opportunities and risks of crypto-assets, including cryptocurrencies and ICOs, including being a resource for updated regulatory information as it continues to develop,” said Mr Travers.
Recent developments of Internet giants Google, Twitter and Facebook electing to limit the growth of crypto advertising represents an opportunity rather than a problem, according to Mr Travers.
“The value of cryptocurrency digital real estate is expected to grow significantly with recent news from the world’s largest technology companies Google, Twitter and Facebook to limit cryptocurrency advertising,” he said.
The double-whammy of news that DigitalX is launching its maiden crypto-asset fund and joint-venturing into launching two authoritative news sources, saw the company’s shares add as much as 31% in early trade on the ASX, before settling back to trade at $0.18 per share, around 6% higher on the day.