The investment fund AddCapital is planning to list a new hybrid product – digitized venture capital funds – at a trading platform in Luxembourg. According to the founders, tokenizing funds will solve the problem of their liquidity and attract new investors. Industry experts believe that the concept deserves attention but its implementationrequire consideration ofregulatory and market-related risks.
AddCapital, an investment fund specialising in investments in digital financial assets (DFA), brings an investment product of a new class – tokenized VC funds worth $20 million – to VNX Exchange, a Luxembourgish marketplace and trading platform. In essence, this product is a hybrid of venture capital and digital assets. “Inside” this instrument – stakes of mature funds investing in large-scale innovative projects, while “outside” is a digital “shell” which allows for secondary-market trading at appropriate trading platforms. “We intend to employ a liquidity mechanism similar to that of ICO,” – Alexander Tkachenko, Founder of VNX Exchange, explained yesterday at a round table about the future of financial markets and regulation of DFAs, held at the Moscow Exchange. First transactions with AddCapital products at the platform are planned for the end of this year.
“ICO attracts investors by its instant liquidity. In exchange, it sacrifices protection of investors’ interests and control over the effectiveness of using the capital. Conversely, VC is focused on protection and control, but sacrifice the liquidity instead. We wanted to combine the better sides of these two approaches,” – Alexey Prokofyev, Managing Partner, AddCapital, commented. According to him, it’s planned to list the new-line products at other regulated platforms in various jurisdictions as well. As for Russia, it’s planned to offer them to qualified investors – private banking clients of top banks. “At the moment, the secondary market for venture capital doesn’t have any effective and regulated instruments to ensure liquidity. Solutions like this will bring this opportunity closer to qualified investors,” – Sergey Polikanov, Executive Director, SberbankCIB, pointed out. Anton Rakhmanov, Managing Director for the Development of the Product Offer, “Private Wealth Management” Block, Alfa-Bank, believes that the new instrument will be much sought-after by qualified investors because of its risk/reward ratio. Andrey Grachev, Founder of Crypsis Blockchain Holding, mentioned that the product is likely to become popular under Russian jurisdiction – if there is a legal framework for it.
Despite all this, crypto market players highlight the downsides of the project. According to Dmitry Lazarichev, Co-founder of the crypto bank Wirex, such tokens are certain to be qualified as security tokens, which will entail a close attention of regulators, including the need to register a prospectus, memorandum, etc. “On top of this, there’s a need to register in multiple jurisdictions as Luxembourg alone is far from enough, even for working on the territory of the EU,” – he pointed out. Also, as Dmitry Galperin, Investment Director of Runa Capital, pointed out, it should be kept in mind that it’s not just the “shell” of an asset that determines its liquidity. “There’s already a secondary market for classical stakes in VC funds, though not very large. It will be great if digitizing the infrastructure helps revitalize it. But I don’t think it will happen soon,” – he stated.
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