Popular U.S.-based cryptocurrency startup Abra made an important announcement on Wednesday, February 6. The blockchain-based Abra app now features a new facility for its users to invest in traditional instruments like stocks, ETFs, commodities, etc. using Bitcoin.
Also, Abra said that it will leverage Bitcoins blockchain network and smart contracts to facilitate this feature. Abra claims that it is the first ever company in the crypto spectrum to bring such services. Abra’s latest announcement allows investors across 155 countries to invest in traditional stocks. This includes stocks of big companies like Apple, Facebook, Amazon, and Google.
Also, using Bitcoins, Abra users can purchase ETF products like Vanguard Growth, and indexes like the Russell 2000. One can also invest in commodities like the SPDR Gold Trust. Currently, the Abra app allows its customers to invest in 50 different fiat currencies and more than 30 cryptocurrencies.
“Just as consumers can own a fraction of a bitcoin, they can soon use Abra to own fractions of high-priced stocks and ETFs,” the firm said. Investments can start from as little as $5 worth of Bitcoin.
Also, the Abra app is absolutely non-custodial. It means that it doesn’t have any access to user-funds. Rather all the funds are stored on the Bitcoin blockchain network thereby making transactions “more secure and private than centralized databases used by most crypto exchanges and wallets.” the firm said.
Available in 155 countries
Fractional investing w/$5 minimums
Private and secure
— Abra (@AbraGlobal) February 6, 2019
Reaching Out to Global Investors
Abra CEO Bill Barhydt said that this move is in regards to democratize financial services.
“We’re enabling something like stock investing. “Our vision for Abra is to create a single app that serves as the go-to investing app for the globe,” Barhydt said. “This is just our first announcement, over time you will see other services in the banking arena to democratize access to financial service.”
Barhydt also explains how his company is reaching to global investors across boundaries. “Many consumers in the US and other countries already have access to stocks and mutual funds via online brokerages. However, many people (billions actually) are shut out of these investment opportunities due to their geography, financial status or lack of accredited investor status, income level, or lack of trust for their local financial institutions. That’s why Abra is leveling the playing field for everyone,” stated CEO Bill Barhydt.
He further added:
“At Abra, we already have low-income families in the Philippines and rich venture capitalists in the US using our app to invest in cryptocurrencies. Now we’re giving our customers access to the same investment products that everyone in the US has enjoyed for decades.”
Abra’s Crypto-Collateralized Contracts (C3) Model
At the heart of Abra’s investment services lies its strong crypto-collateralized model. Abra uses something called “synthetic currency” while converting cash in Bitcoin. Using Abra’s C3 model, users get easy exposure to any asset through Bitcoins and smart contracts. Furthermore, the C3 models also facilitate users to switch investments across the asset class without having to switch wallets or platforms.
In the background, Abra has deployed a robust infrastructure to hedge and short assets. But technically, Abra doesn’t hold any stocks nor does its users. Thus, it doesn’t have the regulatory requirements like its peers, e.g. Robinhood. To understand its working, in brief, consider you’re investing $1000 in Apple shares using the Abra app. Abra will place $1000 worth of BTC against the value of Apple shares.
“As the price of Apple goes up or down versus the dollar, Bitcoin will be added to or subtracted from your contract,” an Abra spokesperson told Hard Fork. “When you decide to close the contract and sell the Apple investment, the value of the shares will be [reflected] in Bitcoin in your wallet,” they added.
“The net effect of the C3 model is that Abra can offer investing with low fees in fractional share increments with near instantaneous settlement times,” Abra notes.