By Peter Hobson
LONDON (Reuters) - Swiss-based commodities fund Tiberius Group plans to make a foray into cryptocurrencies with the launch of what may be the first digital money underpinned by physically deliverable metals including industrials such as aluminum and copper.
The fund, which manages $300 million of investments and also mines and trades metals, aims to launch the Tiberius coin, or tcoin, in July, its co-founder and chief executive Christoph Eibl said.
Allowing buyers to redeem tcoin for metal would give the currency a minimum value and avoid the extreme volatility of other cryptocurrencies such as Bitcoin, Eibl believes.
"We want to propose the idea of a cryptocurrency with real tangible net worth," he told Reuters.
Millions of investors looking for quick returns and an opt-out from government-run money have surged into digital currencies, catapulting Bitcoin, the world's biggest, from $1,000 to almost $20,000 and back to below $12,000 in the last 12 months.
Tiberius coin will not be the first to be underpinned by assets.
Gold-backed currencies such as DigixGlobal in Singapore and Goldmint in Russia are already in place. Others backed by real estate and diamonds are in development and Venezuela plans a cryptocurrency backed by oil, gas, gold and diamond reserves. [nL1N1PB1FR]
Tiberius coin appears to be the first backed by industrial metals, market analysts and participants said.
Because Tiberius is an established player in the metals industry, the tcoin may have a higher chance of success than previous digital coin offerings which have struggled to take off, Charles Hayter, founder of cryptocurrency data analysis firm Crypto Compare, told Reuters.
"The problem has always been that the crypto provider has never had a solid reputation or there has been speculation about whether the underlying metals exist or are stored securely. It sounds like you've got that in this case," Hayter said.
The involvement of an investment fund may deter some investors who see cryptocurrencies as an escape from the regulated financial system and governments, however.
Unlike Bitcoin, which is decentralized, user-generated and without a single administrator, Tiberius coin will be operated by a corporation.
"That starts to jar against the libertarian element of the crypto community," said Hayter.
Tiberius plans to register its currency with regulators, first in Switzerland and then more widely, in an effort to minimize the risk of shutdown or restriction by authorities.
Bitcoin and other digital monies have plunged in value in the past month partly because of fear of a regulatory crackdown aimed at protecting investors from fraud. Japan, China, South Korea and the United States are grappling with how to regulate the sector. India wants to tax it. [nL8N1PB1U1][nL3N1PB3X1]
"We also have more serious concerns of systemic risk within the market, specifically concentrated around exchanges and other safe-haven coins," said Eibl. "We actually see the sell-off as helping the tcoin as it raises awareness of the risks within the cryptocurrency market."
LONDON METAL EXCHANGE
Tiberius received thousands of inquiries about its plans following the publication of a white paper on the currency in December, Eibl said.
He said the coin could be used to invest in metals or hedge exposure to them as well as to protect against inflation.
Tiberius plans to market the coin to investors around the end of February. It is likely to trade at a premium above the price of the underlying metal, with the size of the premium dependent on the supply in circulation and demand.
The coin will be backed by industrial metals stored in London Metal Exchange warehouses and precious metals held at selected refineries and will, like most other cryptocurrencies, be run on a blockchain platform, said Eibl.
Blockchain - or distributed ledger - technology keeps track of and authenticates a continuously growing list of transaction data, which is secured by a global network of computers and is virtually impossible to be tampered with or revised.
Three versions of the Tiberius coin will be launched, each underpinned by a different investment strategy.
One will include nickel, cobalt and aluminum used to build electric vehicles. Another will be backed by copper, tin, zinc, metals used in high-tech sectors such as robotics.
A third will include precious metals gold, platinum and palladium, which are used as hedges against inflation and financial and economic uncertainty.
More coins backed by either a single metal or a combination could be launched at a later date, Eibl said.