Binance Coin ETP now tradeable on Swiss Stock Exchange

As an exchange token, BNB makes an interesting addition to the line-up of other available crypto ETPs.

A Binance Coin (BNB) exchange traded product (ETP) is now on the SIX Swiss Stock Exchange – the fourth largest in Europe – trading under the ticker ABNB. The A stands for Amun, the company behind this crypto ETP, and several others.

Its first crypto ETP was the HODL5 index launched last year. Now ABNB joins as the eighth product in Amun's ranks.

Most are pretty self-explanatory.

But the HODL5 is basically market cap-weighted top 5 (minus Tether), KEYS is essentially the top 10 once you remove dross like BSV, and ABBA is a market cap-weighted index of BTC and ETH, denominated in Swiss Francs and known for fabulous 70s pop hits like Dancing Queen.

All of these other products are relevant as examples of how digital asset ETPs are being packaged for traditional investors on traditional exchanges, where old habits like diversification die hard.

It's also especially relevant for Binance Coin, because as an exchange token BNB could be perceived as being similar to a stock (an investment in Binance as a company), especially when traded on a stock exchange.

Binance CEO Changpeng "CZ" Zhao characterises it as more of a utility token though.

"Our partnership with Amun in launching the BNB ETP will provide investors with a new and regulated asset class with a unique dimension to utility tokens, making them more accessible and reliable through a traditional financial infrastructure," CZ said. "This will provide traditional investors access with diversified exposure and segue into the global cryptocurrency market and its innovative products."

Utility vs equity

Are BNB holdings like an investment in Binance as a company? Or are they more like Chuck E. Cheese arcade tokens?

The answer may be somewhere between the two.

A good analogy is that they're like Chuck E. Cheese tokens, which can be redeemed for arcade games at restaurant locations, if those tokens were:

1. Finite in total circulating supply, and the total amount that can be made
2. Infinitely divisible
3. Freely tradeable and with a clear market value
4. Useable as currency at all kinds of stores beyond Chuck E. Cheese

Intuitively, you can then say that if the restaurant chain expands, the tokens should clearly become more valuable, akin to how shares should appreciate as a company's profits grow.

Under those circumstances, Chuck E. Cheese tokens could start looking like an appetising addition to a portfolio (not financial advice).

As the rodent said:

To each his own fake currency...

— Chuck E. Cheese (@ChuckECheese) July 2, 2019

There are some caveats though.

One is that the value of those Chuck E. Cheese tokens is dependent on people actually playing the arcade games and paying with tokens, rather than simply visiting the restaurants to eat, or paying for the games without using tokens.

This is analogous to the way traders don't actually have to use BNB on Binance. There are trading fee discounts when paying with BNB, and some BNB holdings are required to unlock volume-based trading fee discounts, but it's perfectly possible to use the exchange without BNB.

Indeed, if people expect Chuck E. Cheese tokens to appreciate in value they might prefer not to use them at all, either as intended or as an impromptu currency, which inadvertently undermines the exact reasons why it should theoretically appreciate in value.

It's definitely not as straightforward as saying Binance Coin is an investment in Binance. The stuff is clearly a separate type of asset with functions elsewhere, but there is some overlap between the value of the utility token and the value of the company it's used with.

But how do you quantify that overlap?

One way might be to ask how BNB usage impacts Binance's bottom line as an exchange. If BNB is used to get trading fee discounts, then it's actively taking away from that trading fee revenue stream. If equity value is based on revenue, then this is a very tangible example of how Binance Coin is encapsulating some shareholder-style value.

As ASX said in its guidance to listed crypto companies, token issuance tends to see some of the value of a company shift from the company's underlying securities into the tokens.

However, working out the balance of value stored in equity vs utility remains as much art as science. Now, with the addition of ABNB to SIX, a great many more traditional investors can try their hand at it.

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Disclosure: The author holds BNB, BTC at the time of writing.

Picture: Shutterstock