LONDON (Reuters) - London-based Abacas has launched asset-backed coins (ABCs) that will allow investors to trade a range of assets on a digital exchange, the company’s chief operating officer Morgan McDonnell said on Monday.
Rather than supplant the fund firms that buy and sell stocks, bonds and other assets on behalf of investors, Abacas has designed a new trading environment in which investors will be able to trade a range of assets using ABCs.
Each investor will be able to park their stocks, bonds or other assets with a custodian bank in exchange for ABCs.
McDonnell told Reuters the exchange would however likely start with one asset class - probably gold - before moving on to other assets.
After talks with asset managers in Britain, Abacus aims to go live in 2016 with around 750,000 coins, each worth $1,200 to $1,500, for a day one market of around $1 billion.
McDonnell declined to say which investment firms had signed up to participate.
ABCs will be backed by physical assets held in a trust and under a custodian arrangement for assets. The units will be hard-wired to physical assets, so the intrinsic value of the digital asset will always equal the value of the physical asset.
The ability to trade in and out of a variety of assets using the same exchange and the same ‘currency’ cut down on trading costs, removed currency and counterparty risk and improved liquidity for smaller firms, McDonnell said.
“While it will increase liquidity to the client side, it may lead to a reduction in the need to execute externally,” McDonnell, who used to head foreign exchange, cash and credit at RBC Investor Services, said.
“I think its biggest disruptive effect will be...drops in foreign exchange at external markets and possibly some drops in execution on other live exchanges,” he added.
Reporting by Simon Jessop; editing by Susan Thomas