Retail investors not very well-versed in investments indirectly buy a pool of individual stocks in a mutual fund. Mutual funds are managed by professionals who try to maximise the value of the fund for the investors. In a way, it is an indirect way to invest.

Exchange Traded Funds are commonly known as ETFs. They hold a basket of assets of securities, say bonds, shares, money market instruments etc. These ETFs often track on the underlying asset, or reflect the composition of benchmark index. These funds track a particular index.

ETFs have attributes of mutual funds and stocks as these can be traded like stocks on exchanges.

So far we dealt with various types of ETFs, say bond ETFs, currency ETFs, inverse ETFs, liquid ETFs, gold ETFs, index ETFs etc.

Of late, we have a new class of ETFs — Crypto ETFs. These are basket of virtual assets, say of several cryptocurrencies. Crypto ETFs too are traded on exchanges. Traditional funds are handled by asset management companies (AMCs), whereas crypto ETFs are not. Crypto ETFs are handled by crypto exchanges or some wealth management companies. It is not necessary to have a demat account for crypto ETFs.

The US Securities Exchange Commission (SEC) allowed first crypto ETF to be listed in October, 2021. In those days Bitcoin touched $65000 plus. Crypto ETF did not directly invest in Bitcoin. Instead, it bought its futures contracts. A future contract is a legal agreement to buy or sell a particular commodity or asset or crypto at a pre-determined price at a specified date in future. Crypto futures are derivatives of crypto currencies.

Globally, several such Crypto ETFs have appeared. Some invest in virtual assets directly and some through futures.

Some focus on stocks of companies into blockchain technology or crypto-related areas.

First US ETF attracted $1 billion investment within a short time.

Crypto ETFs divide ownership of itself into shares held by shareholders. They allow you to diversify portfolio without owning the asset.

In Canada, they allow you to invest in crypto ETFs which directly invest in cryptos. In some European countries too this is allowed. However, the US does not allow this route.

India’s first crypto ETF could be launched in GIFT City, Gandhinagar, Ahmedabad.

Indians can invest in regulated crypto ETFs abroad, Indians buy these as they do while buying foreign-listed stocks and ETFs. They can avail of RBI’s LRS route.

Alternatively, Indians approach a local crypto exchange or wealth management firm. These offer ETF-equivalents. They are just a bucket of crypto assets and cannot be traded.

ETFs are index funds. They hold the same securities in the same proportions as a certain market index or bond index. ETF-equivalents guide you to decide which token to buy and in what proportion. Here index is arrived at by considering token’s market capitalisation and popularity.