Cryptocurrencies, such as Bitcoin (BTC), Ethereum (ETH), Cardano (ADA) and Chainlink (LINK), offer significant advantages such as decentralization, lack of reliance on traditional financial intermediaries, access for individuals who may be excluded from traditional banking systems, security features (including encryption/decryption, public/private keys and hash functions), control via ownership of private keys, enabling fast and borderless transactions, providing constant access for trading and transactions and, in some cases, the ability to support the creation of smart contracts. To learn about how to incorporate smart contracts into your business, you can read Brown Rudnick's article on that topic by clicking here.

Cryptocurrencies can be owned directly, via wallets (digital tools that store private keys) or indirectly, via Exchange Traded Funds (ETFs), which hold one or more cryptocurrencies as underlying assets.

Cryptocurrencies can be directly acquired through various methods, including:

  1. Cryptocurrency Exchanges, such as Coinbase, or Kraken, which allow users to create accounts, deposit funds, and trade multiple cryptocurrencies. Cryptocurrencies may also be acquired via PayPal, which in the U.S. is licensed as a money transmitter.
  2. Peer-to-Peer (P2P) Platforms, such as LocalBitcoins, Paxful or Bisq, which facilitate direct transactions between buyers and sellers with multiple payment methods.
  3. Cryptocurrency ATMs, which allow users to buy cryptocurrencies using cash or credit/debit cards.
  4. Cryptocurrency Wallet Services, such as Exodus, Atomic Wallet or Electrum, which provide built-in features for purchasing cryptocurrencies directly within the wallet interface.
  5. Over-the-Counter (OTC) Trading, most commonly used by institutional investors or individuals looking to make large trades.
  6. Security Tokens may be acquired in platforms that are registered with the Securities and Exchange Commission (SEC) as Alternative Trading Systems (ATS), such as tZero and OpenFinance, broker-dealers and crowdfunding platforms such as Kickstarter and StartEngine.

Cryptocurrency laws and regulations vary significantly across jurisdictions. Token offerings are often subject to securities laws and other rules tailored to token offerings. To learn about how to workwithdigitalassets, you can read Brown Rudnick's article on that topic by clicking here. Similarly, cryptocurrency exchanges and wallet providers are typically required to obtain licenses or register with relevant authorities.

Unlike directly holding cryptocurrencies, investing in a cryptocurrency ETF involves buying shares of the issuing fund, which represent ownership of the underlying cryptocurrency(ies). The primary purpose of cryptocurrency ETFs is to provide a regulated and easily tradable instrument for investors interested in the relevant cryptocurrency(ies).

Single-Cryptocurrency ETFs focus on tracking the performance of a specific cryptocurrency, such as Bitcoin (BTC) or Ethereum (ETH). These ETFs provide exposure to the price movements of the designated cryptocurrency.

Multi-Cryptocurrency ETFs are designed to provide exposure to a broader range of cryptocurrencies, and aim to track the performance of a cryptocurrency index or a specific segment of the market.

Key features of cryptocurrency ETFs include:

  1. Diversification: Cryptocurrency ETFs often hold a diversified portfolio of cryptocurrencies which can help spread risk across different cryptocurrencies.
  2. Regulated Investment Vehicle: ETFs are subject to compliance requirements contemplated in the applicable securities laws and regulations as well as relevant disclosure requirements. For example, in the U.S., the SEC plays a significant role in regulating ETFs and in the European Union, ETFs are regulated by the European Securities and Markets Authority (ESMA). In addition to country-specific regulations, ETF issuers and managers must comply with specific rules related to the structure, disclosure, marketing, and management of ETFs.
  3. Accessibility: ETFs are traded on traditional stock exchanges, making them accessible to investors who may be more familiar with traditional investment platforms.
  4. Liquidity: ETFs typically offer high liquidity, allowing investors to buy or sell shares throughout the trading day at market prices.
  5. Professional Management: Cryptocurrency ETFs are managed by professional fund managers or investment firms.
  6. Market Tracking: Some cryptocurrency ETFs aim to track the performance of specific cryptocurrency indices, providing investors with exposure to market trends.

The relevant ETF prospectus provides details about the fund's investment strategy, the cryptocurrencies it includes, and any associated fees.

Individuals and companies based in LatAm can generally buy ETFs by opening an account with reputable brokerage platforms which support ETF trading and have access to international markets.

Cryptocurrency ETFs offer a convenient investment vehicle for individuals and institutional investors seeking exposure to cryptocurrencies without directly holding the cryptocurrency. Investors may purchase shares on the secondary market, and the ETF issuer uses the creation/redemption process to manage the fund's size as well as maintain its investment objective.

Cryptocurrencies and cryptocurrency ETFs represent different types of assets within different financial and regulatory ecosystems. As you decide to invest in, or transact with cryptocurrencies, it is important to consider related risks, such a price volatility, security and regulatory environment of all jurisdictions involved. Complying with regulatory requirements in your home country regarding international investments, trading and tax regulations is key.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.