Abra, the cryptocurrency investing app, is expanding into stocks. And not only stocks but a plethora of traditional assets—a market the company’s CEO, Bill Barhydt, thinks is 50 to 100 times bigger than the market for crypto alone.
Starting today, people in more than 155 countries can sign up to get early access to the new service, which will offer dozens of traditional assets, from blue-chip technology stocks (read: FAANG) to exchange-traded funds (think Vanguard and SPDR Gold Trust). Add those to the 30 different digital assets and 50 national currencies the app already supports, and Abra starts to look like a one-stop shop for anyone willing to get creative about wealth creation.
To Barhydt, moving into mainstream financial assets makes perfect sense, even for a bitcoin bull. “The crypto maximalist pitch to the public is that you should have five percent of your net worth in [digital] assets, because the upside is huge,” he says. “Okay, but what about the people in these other countries who are buying crypto, but don’t have access to this other stuff where they should be putting 95 percent of their money?”
Abra launched in early 2018, and today has 500,000 users across more than 100 countries. Three factors, according to Barhydt, make the company’s model more accessible than traditional investing. The first involves Abra’s use of crypto as collateral. Instead of filling a user’s buy order for, say, 10 XRP or a share of Netflix stock, Abra supplies the equivalent amount of bitcoin, and a smart contract pegs its value to the market rate for the purchased asset. That way, users get price exposure to the assets of their choice without any actual shares of a stock or an ETF changing hands.
The second is related: Because every investment position is stored on the bitcoin blockchain, Abra doesn’t have to hold any assets on behalf of users, which means it isn’t regulated as a brokerage or exchange, so it can offer its services worldwide.
Finally, providing bitcoin as a stand-in for other assets means Abra can make stocks available even to people who can’t afford to buy full shares. A minimum order of $5 will get you a piece of Facebook.
“This is about access. We want to democratize access to financial services,” Barhydt says. “Every time Abra launches a product, I want that product to be available globally. I don’t want to [prioritize] rich Westerners.”
One way to entice the global south to invest is to make it cheap to do so. While Abra makes a small profit—called a “spread”—on each crypto trade, by setting the exchange rate between assets on its platform, the startup plans to waive trading fees on stocks and ETFs in 2019 for anyone who signs up for the new offering during its pre-launch period. Those users will also get early access to the equity products when they become available later this quarter.
Waiving fees makes sense as a way to rapidly grow the app’s user base. Abra has what Barhydt describes as a highly automated back-end trading operation by which it can hedge away its own risk, and possibly even make money. If it proves to be profitable enough, he may pass those savings on to customers. “My desire would be to keep the fees as close to zero as possible, forever,” he says.
Such desires are all part of Barhydt’s grand vision to democratize finance. Abra plans to add credit services to its app later this year, allowing users to borrow against their assets.
During the first weekend in February, Barhydt gave a presentation to about 50 people at the fifth annual Satoshi Roundtable, a private, invitation-only conference that has been compared to “a family reunion for crypto.” People were stunned that bitcoin could be repurposed into “a super-useful global consumer service like this,” he says.
It remains to be seen whether Abra’s current users will want to diversify their portfolios with stocks and ETFs, or whether an app known for catering to the crypto crowd can compete with rivals that offer low-cost investing in traditional assets. Barhydt is already looking ahead. Full-fledged payment and remittance services are next on the drawing board.
“We’re in inning two of a nine-inning game,” he says. “Inning one lasted for two and a half years. We’re in this for the long game. We don’t mind if it takes six or seven years for the entire planet to know about us, as long as they do.”
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