Non-custodial digital asset wallet and investing app Abra has introduced a new service that allows its clients to buy traditional assets like shares and exchange-traded funds (ETFs) with bitcoin.
The Abra app offers its global customers 30 different cryptocurrency investment options, with users able to access these assets via both fiat and crypto.
The new feature offers its clients exposure to 50 new traditional investment assets including big tech stocks Facebook, Apple, Amazon, and Google.
Users will also have the opportunity to buy commodities like the SPDR Gold Trust and ETF products like Vanguard Growth and the S&P 500. Early access users will enjoy feeless trading for the rest of 2019.
Investing in the stocks and ETFs will utilize an investing model Abra has developed called Crypto Collateralized Contracts (C3s). The model allows crypto investors to buy any of the 50 new assets using bitcoin and smart contracts.
However, the investor does not purchase or own actual stock in the company. What happens is that the user gets a bitcoin representation of the stock, ETF or commodity.
Users top up their accounts with enough funds to purchase the given stock at its current price, and the C3 system automatically converts the user’s cash to bitcoin. It then uses a smart contract to tie bitcoin’s notional value to the particular stock’s price.
The app then maintains a user’s bitcoin balances depending on price changes, and for the investment, changes in the share prices in an investor’s portfolio dictates how much BTC Abra adds or subtracts from the user’s overall holdings.
For instance, a user who uses bitcoin to buy $1,000 worth of Apple will make a profit on the investment if Apple’s price goes up, getting more bitcoin. But if the price goes down, the user’s bitcoin holdings reduce.
Technically, neither Abra will nor its users will own the purchased stock, meaning that the investment platform’s new products do not constitute tokenized shares. According to Barhydt, the new assets offered by the platform “aren’t ERC-style ethereum tokens.”
He told Forbes does not buy “the underlying investment assets for customers” and that all the purchases settle on the bitcoin blockchain.
“[…] there’s no concept of broker dealing or any kind of swap execution facility underlying this platform.”
And because no tokenization takes place on the Abra app, the platform may not face the same regulatory requirements that platform like Robinhood or TDAmeritrade has. It means that the firm’s services can be accessed across 150 countries.
Abra will also be looking to add to this feature by rolling out other services targeting the banking industry “to democratize access to financial service,” Barhydt said.
According to Barhydt, using bitcoin makes Abra’s model unique from the numerous firms (like Acorns, Stash and Robinhood) that are trying to democratize finance.
“If you deposit crypto into Abra to buy SPDR’s ETF, I don’t need to know who you are.”
There might be skepticism around the new feature, especially whether it will maintain the bitcoin-stock peg. But Barhydt points to the fact that the firm already has a track record of providing bitcoin representations of various altcoins.
Even with the 2018 bear market, which saw bitcoin’s price decline by 80 percent, Abra was still able to maintain these pegs. The hedging system, the exec noted, “worked perfectly” all through the market crash.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.