WisdomTree Investments announced Tuesday it led a $17.65 million Series A funding round in Securrency Inc., a technology startup that WisdomTree hopes will help bring blockchain technology to the ETF space.
Securrency uses blockchain, the digital ledger technology that underpins digital currencies such as bitcoin, to build market infrastructure technology, including an identity and compliance framework to support digital securities transactions on a global scale. Using Securrency technology, financial services firms can use tokens to issue, trade and service traditional securities and assets on a digital network.
WisdomTree founder and CEO Jonathan Steinberg said he believes this technology can provide a more investor-friendly securities wrapper than the current exchange-traded-fund structure. The hope is that blockchain can improve the current experience of trading ETFs and expand its availability to more of the investing public.
Securrency’s technology meets a higher standard of compliance with securities laws and regulations where other blockchain technologies fall short, Mr. Steinberg said.
“Our investment in Securrency is the result of a multiyear review of blockchain technology and the associated landscape,” Mr. Steinberg said in a statement announcing the strategic investment. “In our review, we found instances of unnecessary applications of the technology and poor compliance with existing regulations; however, there are numerous elements of blockchain technology that, when correctly applied, will bring benefits to investors.”
When asked what blockchain can specifically improve about ETFs, William Peck, director of corporate strategy for WisdomTree Asset Management, mentioned things like settlement times and the addition of smart contracts and global trading. Digitizing traditional assets can streamline the experience and make trading more efficient, Mr. Peck said in a telephone interview.
But just as important, Securrency’s technology can bring the experience digitally native investors are accustomed to with cryptocurrencies to the ETF market.
Just as WisdomTree was an early leader in the shift from mutual funds to ETFs, Mr. Steinberg said the investment in Securrency positions the asset manager to be a future leader in the shift to digital assets. In a separate announcement, WisdomTree launched its own bitcoin exchange-traded product (ETP) on Switzerland’s SIX stock exchange.
“I used to walk into a crowded room and I would say the ETF is to the mutual fund what the internet is to the newspaper,” Mr. Steinberg told InvestmentNews. “Customers demanded a better experience … but when the ETF first launched, nobody cared. Nobody knew what it was.”
The next big evolution will be toward digital assets and securities, and Mr. Steinberg said WisdomTree will play a role in educating financial advisers and other intermediaries on the importance of these new technologies.
“The world of financial services and investors themselves are going to be interested in digital assets,” he said. “Advisers will be forced to become proficient in the conversation if they want to hold on to their clients.”
Other participants in the round of funding include the Abu Dhabi Investment Office (ADIO), Japanese financial services giant Monex Group Inc., and venture capital firms RRE Ventures, Strawberry Creek Ventures and Panthera Capital Investments.