Europe’s first bitcoin ETF set to launch after 12-month delay

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Europe’s first bitcoin exchange traded fund is expected to be publicly listed this month, 12 months after its planned launch.

Jacobi Asset Management originally announced that its bitcoin ETF was to list on Euronext Amsterdam in July 2022. However, it now says the fund is “on track” to launch this month, having decided that last year “the time wasn’t right” following the Terra Luna cryptocurrency crash in May 2022 and crypto exchange FTX’s collapse in November.

The asset manager says “demand has shifted since last summer”.

In Europe all digital assets exchange traded products so far have been structured as exchange traded notes, rather than funds.

Each ETF shareholder owns a portion of a fund’s underlying shares, while investors in ETNs own a debt security, not the underlying assets.

Jacobi has made much of the fact that it is launching an ETF rather than an exchange traded note.

Peter Lane, co-founder and chief operating officer of Jacobi, told Ignites Europe last year that structured note issuers were guilty of “misuse” of the ETF term.

“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,” he said.

Jacobi said its ETF, unlike ETNs, cannot be leveraged or use derivatives, which could otherwise lead to “significant counterparty risk”.

The fund has been authorised in Guernsey, a jurisdiction that offers “a number of advantages” to help the launch of a bitcoin fund, said David Crosland, a partner in offshore law firm Carey Olsen.

“As a specialist fund servicing jurisdiction that is not subject to the inherent inflexibilities of being an EU member, Guernsey was able to move quickly to adapt to support this launch,” he said.

“[Guernsey’s] flexibility and willingness to understand the complex detail has allowed the promoter to launch a fund vehicle that benefits from regulated fund status when other European jurisdictions are unable to do so,” Crosland added.

Michael O’Riordan, founding partner of ETF and digital assets consultancy Blackwater Search and Advisory, said the regulatory challenges of launching a bitcoin ETF in Europe were “very large” as bitcoin was not considered an eligible asset under Ucits rules.

“However, in practice, apart from some structural differences, the ETF and the ETP are quite similar,” he said.

“As an industry, we have not done a good job at distinguishing each and as a result there is a lot of confusion in the market as to which is which,” O’Riordan added.

Net flows into European digital assets ETPs over the past 18 months amounted to $483mn, including inflows of $398mn in the third quarter of 2022 alone, according to data from Coinbase and Bloomberg.

Assets in European digital assets ETPs stand at €4.3bn, having peaked at €10.5bn at the end of 2021, according to Ignites Europe analysis of Morningstar data.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at igniteseurope.com.