Europe’s first bitcoin exchange-traded fund (ETF) is set to launch in July after a 12-month delay caused by the crypto winter. The fund has been authorized in Guernsey, a more flexible jurisdiction, which will ostensibly help to avoid some of the regulatory challenges associated with the European Union.
Europe to Have Its First Bitcoin ETF Listed After Year-Long Delay
The first bitcoin exchange-traded fund in Europe is expected to be publicly listed by the end of this month, a full year after its initially planned launch, the Financial Times reported on Thursday. The ETF was first announced by Jacobi Asset Management in July 2022.
The asset manager wanted to list it on the Euronext exchange last year but decided that “the time wasn’t right” after a string of negative events in the crypto space like the crash of the terra-luna project and the bankruptcy of cryptocurrency exchange FTX. The issuer now says “demand has shifted since last summer” and the ETF is “on track.”
All exchange-traded products (ETPs) based on digital assets in Europe so far have been structured as exchange-traded notes (ETNs), rather than funds, the business daily pointed out. Jacobi has specifically highlighted that it’s launching an ETF, not an ETN. While an ETF shareholder owns a portion of a fund’s underlying asset, ETN investors own a debt security.
“There has been so much misinformation and misuse of the term ETF by [ETN] issuers, presumably to obfuscate the risks that are inherent in acquiring and investing in ETNs,” Jacobi’s co-founder and Chief Operating Officer, Peter Lane, was quoted as saying last year.
Jacobi’s Bitcoin Fund Authorized in Guernsey
Unlike ETNs, the bitcoin ETF that Jacobi Asset Management prepares to offer cannot be leveraged or use derivatives, which could otherwise lead to “significant counterparty risk,” the investment management firm emphasized.
The new ETF has been authorized in Guernsey, a Channel island jurisdiction that will facilitate its launch as it “is not subject to the inherent inflexibilities of being an EU member,” noted David Crosland, a partner in offshore law firm Carey Olsen.
Launching a bitcoin ETF in Europe would have come with “very large” regulatory challenges, according to Michael O’Riordan, founding partner of ETF and digital assets consultancy Blackwater Search and Advisory. He explained that bitcoin is not considered an eligible asset under the EU’s Undertakings for Collective Investment in Transferable Securities Directive (Ucits) which allows collective investment schemes to operate throughout the Union based on an authorization from a single member state.
Quoting data from Coinbase and Bloomberg, the report details that net flows into European digital-asset ETPs reached $483 million over the past 18 months and assets in European digital-asset ETPs stand at €4.3 billion (over $4.8 billion), according to Morningstar data analyzed by the FT’s Ignites Europe asset management industry news outlet.
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