Launch of the first European bitcoin ETF after 12 months delay

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Europe’s first bitcoin exchange-traded fund is set to go public 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 was not right after the Terra Luna cryptocurrency crashed in May 2022 and the crypto exchange FTX crashed in November.

The asset manager says demand has changed since last summer.

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

This article was previously published by Ignites Europe, a title owned by the FT Group.

Each ETF shareholder owns a portion of a fund underlying the stock, while ETN investors own a debt security, not the underlying assets.

Jacobi has been very insistent that he launch an ETF rather than an exchange-traded note.

Peter Lane, co-founder and COO of Jacobi, told Ignites Europe last year that structured note issuers were guilty of misusing the term ETF.

There has been so much misinformation and misuse of the term ETF by [ETN] issuers, presumably to mask the risks inherent in acquiring and investing in ETNs, he said.

Jacobi said his ETF, unlike ETNs, cannot be mined or use derivatives, which could otherwise result in significant counterparty risk.

The fund has been licensed in Guernsey, a jurisdiction that offers a number of benefits to help launch a bitcoin fund, said David Crosland, partner at offshore law firm Carey Olsen.

As a specialist fund services jurisdiction that is not subject to the inflexibilities inherent in EU membership, Guernsey was able to adapt quickly to support this launch, he said.

[Guernseys] The flexibility and willingness to understand the intricate details has allowed the promoter to launch a fund vehicle that enjoys regulated fund status when other European jurisdictions are unable to do so, Crosland added.

Michael ORiordan, founding partner of ETF and digital asset consultancy Blackwater Search and Advisory, said the regulatory challenges of launching a bitcoin ETF in Europe were very significant because bitcoin was not considered a an eligible asset according to Ucits rules.

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

As an industry, we haven’t done a good job of distinguishing between each and as a result there is a lot of confusion in the market as to which is which, ORiordan added.

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

Assets in European digital asset ETPs stand at 4.3 billion, after peaking at 10.5 billion at the end of 2021, according to Ignites Europe analysis of Morningstar data.

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

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