Expected by many investors, Bitcoin Spot ETFs are in the news. In the United States, the stock market regulator (SEC) could end up accepting them. Things are also changing in Europe and Asia. We take stock of the situation.
How can you escape it? For the past few weeks, all anyone has been talking about are Bitcoin "Spot" ETFs, wondering whether the US securities regulator (SEC) will finally accept them. The subject has been making the headlines in the crypto media, and even the highly reputable "Wall Street Journal" talked about it a few days ago!
It has to be said that the stakes are high for investors and the crypto industry: in less than 30 years, ETFs (exchange traded funds) have exploded and democratised equity markets like never before. The arrival of ETFs, especially "Spot", which are the safest category - they are based on real bitcoin, could therefore do the same with cryptos 🚀.
A sign that the subject is hot, things are also moving in other parts of the world, and particularly in Europe and Asia.
In the United States, there have been Bitcoin ETFs for years, but they are not "Spot" ETFs, they are "Futures" ETFs. Unlike Spot ETFs, Futures ETFs are investment products based on futures contracts. There are no "real" bitcoins behind them, just a commitment to buy or deliver bitcoins on a specific date and at a specific price.
These Bitcoin "Futures" ETFs are available in the US for retail and institutional investors. They are allowed because they are well supervised and regulated. "Futures contracts are traded on regulated markets supervised by the CFTC (Commodity Futures Trading Commission)," explains Bruno de Souza, head of US and Europe at Hashdex , which is an asset manager specialising in crypto.
Thanks to this oversight, the SEC believes there are sufficient safeguards to prevent price manipulation, which is not the case with the Spot market.
But as the suit between Grayscale and the SEC has shown, this argument about the difference between Spot and Futures markets is no longer considered relevant. "The SEC has not demonstrated that the Futures and Spot markets operate differently and that one of them deserves separate treatment," Kramer Levin lawyer Morgane Reicher reminded us a few days ago (read her interview) .
As a result, things could change quickly for Bitcoin Spot ETFs, and even for other cryptocurrencies such as ether. The US fund Ark Invest and the Swiss company 21Shares announced last night that they had filed an application for a Spot Ethereum ETF, which is a first for ether.
"The US situation is being scrutinised by the whole world. An initial approval would mechanically accelerate the adoption of bitcoin and more broadly cryptos as an asset class in the traditional financial world," points out Marina Baudéan, head of France and Benelux at 21Shares, an asset manager that has also filed for a Bitcoin "Spot" ETF.
Several giants such as BlackRock , WisdomTree, Fidelity are all in the starting blocks. For all of them, the SEC has so far systematically pushed back the deadlines. It can no longer do so and, in the event of another refusal, will have to legally justify its choice in mid-March 2024 👀.
In Europe, and more specifically in the European Union (EU), the subject of Bitcoin ETFs is making less noise simply because it is not possible to launch an ETF on a single asset, be it a stock or bitcoin. On the other hand, it is possible to gain exposure to bitcoin and other cryptos via products in the same family as ETFs: ETCs (Exchange Traded Commodity).
Important point: ETFs and ETCs belong to the large family of ETPs (Exchange Traded Products). There, so things are clear 😎.
The principle of the ETC is that the investor will buy a debt security whose objective is to reproduce the performance of an underlying asset held by a physical custodian. This set-up is very similar to that of a Bitcoin Spot ETF based on the American model. "Europe is ahead of the US as it already has the equivalent of a Bitcoin Spot ETF and they are available," notes one investor.
Several players such as 21Shares, CoinShares and Hashdex have launched Bitcoin ETCs, often referred to as Bitcoin ETPs by fund managers. These products, which are available to both institutional and retail investors, have had very different successes in different countries.
"There are major cultural disparities in investment in Europe, which makes the distribution of ETPs very uneven depending on the country. In France, investment for individuals via this type of product is not very developed, unlike in countries such as Germany or Sweden," explains Jean-Marie Mognetti, CEO of CoinShares 🇬🇧, one of Europe's leading crypto asset managers.
The financial players who did not want a Bitcoin (or Ethereum) ETP have moved outside the European Union. This is notably the case for Jacobi Asset Management. The British fund has gone to register its Bitcoin Spot ETF in Guernsey (British Crown).
The ETF is listed on the Amsterdam Stock Exchange, but it is not yet available in the European Union, and indeed may never be if regulations do not change between now and then. As Martin Bendall , CEO of Jacobi Asset Management, explained to us, the company is betting heavily on the US and Asia.
In Asia, the landscape is rather mixed. While things are rather at a standstill in Japan and South Korea, things are moving quite fast in Hong Kong, where the authorities, with the complicit benevolence of Beijing, want to retain their position as a global financial centre.
Since this summer, a licence has been in force establishing rules for exchange platforms and, above all, opening the door for retail investors to invest in crypto 👀.
In terms of crypto ETFs, Hong Kong is emerging as a stronghold in Asia. In December, the first Bitcoin and Ethereum ETFs based on futures contracts were listed on the Hong Kong Stock Exchange. These ETFs were launched by CSOP Asset Management.
A month later, it was Samsung Investment's turn to offer a Bitcoin futures ETF. But as yet, the Securities and Futures Commission (SFC) has not given the go-ahead for the launch of a Spot ETF. In a circular published in October 2022, the SFC made it clear that spot crypto ETFs would, come what may, remain reserved for "institutional investors".
