21Shares launches crypto-backed loans ETP

May 25th, 2022 | By | Category: Alternatives / Multi-Asset

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Digital assets specialist 21Shares has launched a new ETP offering income generated from lending activities in the crypto ecosystem.

21Shares launches USD crypto lending ETP

Loans made by the ETP are at least 110% collateralized by bitcoin and ether.

The 21Shares USD Yield ETP (USDY SW) has been listed on SIX Swiss Exchange in US dollars.

USDY takes in US dollars, converts them to USD Coin (USDC), a stablecoin with a fixed $1.00 price, and lends out the USD Coin to institutional-grade counterparties.

USDC serves to tokenize US dollars, enabling their use over the internet and public blockchains which is considerably faster than traditional settlement approaches such as wire transfers.

The lending of the ETP’s USDC is facilitated by BlockFi, a global cryptocurrency trading platform that also offers a range of crypto-related products including the ability to earn interest on deposited digital assets.

According to BlockFi, as of the beginning of May 2022, USDC interest accounts were offering an annual percentage yield of 5% for the first 2 million USDC invested and 4% on any balances above that figure.

Income generated by lending activities is accumulated within the ETP’s net asset value.

To protect against default risk, USDC loans made by the ETP are at least 110% collateralized by bitcoin and ether with the value of collateral marked to market daily.

Notably, the ETP does not take on any direct crypto price exposure.

The ETP may appeal to investors wishing to build higher-yielding cash portfolios in what is a challenging environment of historically low interest rates, high asset values, and growing inflationary pressures.

Ophelia Snyder, President and co-Founder of 21Shares, commented: “We’re really excited to offer a first-of-its-kind product that can provide meaningful risk-adjusted yield. USDY does this by tapping into the crypto capital markets where rates are higher while also providing liquidity. With USDY, we’re introducing a financial product fully dedicated to providing yield and minimizing risk while reaffirming the vision of 21Shares – to build bridges into the crypto world.”

The ETP comes with an expense ratio of 0.30%.

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