The first spot Bitcoin ETF is coming to Europe after a long-winded 12-month delay characterised by a series of catastrophic failures in 2022.
By the end of the month, crypto enthusiasts in Europe may be able to invest in a Spot Bitcoin exchange traded fund (ETF).
A year overdue
As reported by the Financial Times on Thursday, the first Spot Bitcoin ETF will be launched this month by Wealth manager Jacobi Asset Management. The ETF was originally planned to debut in July 2022 but was pushed back for a year due to the non-stop blowouts and fraud seen that year.
The investment firm pulled a U-turn due to these unfavourable market conditions, at the time, with Terra’s collapse happening one month prior. Terra’s Do Kwon faces the prospect of a 40-year prison sentence for suspected malfeasance. This week, former CEO of bankrupt lender Celsius’ Alex Mashinsky was arrested on fraud charges.
The asset manager is now “on track” to list the fund this month, citing a shift in demand since 2022. The launch will mark the first cryptocurrency ETF in Europe, given that all current exchange-traded products are structured as exchange-traded notes (ETN) instead of funds.
An ETF allows shareholders to own the underlying shares of a fund, whereas ETNs allow investors to acquire a debt instrument and not the underlying asset. ETFs, unlike ETNs, cannot be leveraged or used with derivatives, making them far less risky, according to Jacobi.
Jacobi’s announcement comes amidst a resurgence in crypto asset fund flows, and rising cryptocurrency prices. Per CoinShares data, crypto investment products saw three weeks of inflows, reaching $470 million amid increasing institutional interest. Bitcoin is up 90% since January 2023, exchanging hands at $31,250 at the time of writing.
Interestingly, the US Securities and Exchange Commission (SEC) has consistently rejected Spot Bitcoin ETF filings citing unintelligible concerns about “investor protection“. Many have accused the SEC of deliberately thwarting the cryptocurrency space with its abrasive ‘regulation by enforcement‘ techniques.
Why does a Spot Bitcoin ETF attract attention?
As alluded to, regulators in the United States and elsewhere have cited ‘investor protection’ concerns while rejecting ETF applications. However after BlackRock, the largest asset manager applied to launch a spot Bitcoin ETF in the United States, the Securities and Exchange Commission quickly changed its tune. In the first week of July, the SEC indicated that it required a surveillance sharing agreement in order to prevent manipulative trading activity to view the application more favourably.
Spot Bitcoin ETF applications increased optimism for Bitcoin due to the prospect that the number one crypto would witness mainstream acceptance among institutional players. The optimism was accompanied with a market rally that sent Bitcoin beyond $30,000 for the second time this year.
If given the green light, a Spot Bitcoin ETF would provide investors in the US with direct access to the world’s biggest cryptocurrency by market cap. In other words, US investors will be able to trade BTC via a brokerage account. BlackRock’s application was described as unclear, but the asset manager refiled the application after updating it.
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