The bitcoin ETF by Jacobi Asset Management, initially slated to list on Euronext Amsterdam in July 2022, is now set to launch this month after being postponed due to market conditions, including the Terra Luna cryptocurrency crash and FTX exchange collapse in 2022, as the asset manager notes a shift in demand since then.
Up until now, all exchange-traded products in Europe involving digital assets have been set up as exchange-traded notes (ETNs) rather than funds. Unlike investors in ETNs, who own debt security rather than the underlying assets, shareholders of ETFs each owns a portion of the underlying shares of the fund.
Instead of releasing an exchange-traded note, Jacobi has made much of the fact that it chose to launch an ETF. Jacobi stated that, unlike ETNs, their ETFs cannot be leveraged or use derivatives, both of which could result in “significant counterparty risk.”
Structured note issuers were guilty of “misusing” the ETF term, according to Peter Lane, co-founder and COO of Jacobi, who stated this at Ignites Europe last year.
The Bitcoin fund has received authorization in Guernsey, a jurisdiction that offers advantages for launching such a fund due to its flexibility and ability to adapt quickly, according to David Crosland, a partner at Carey Olsen. Guernsey’s regulatory support has allowed for the launch of a regulated fund status, benefiting the promoter when other European jurisdictions are unable to do so.
Since Bitcoin is not regarded as a qualifying asset under Ucits regulations, Michael O’Riordan, founder partner of ETF and digital asset consultancy Blackwater Search and Advisory, said there are “very large” regulatory obstacles associated with the introduction of a bitcoin ETF in Europe.
Michael O’Riordan stated, “however, in practice, apart from some structural differences, the ETF and the ETP are quite similar. 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.”
According to data from oinbase">Coinbase and Bloomberg, net inflows into European digital asset ETPs totaled $483 million over the previous 18 months, with $398 million of those inflows occurring just in the third quarter of 2022. Also, Morningstar data by Ignites Europe reported that the assets in European digital asset ETPs currently total €4.3 billion after reaching a peak of €10.5 billion at the end of 2021.
