London based ETC Group is set to list the world’s first cryptocurrency exchange-traded product (ETP) later this month on Xetra. The BTCetc Bitcoin Exchange Traded Crypto (BTCE), which tracks the price of bitcoin and is 100% physically backed, aims to provide investors with a safe and transparent way to gain exposure to bitcoin.
According to ETC, trading bitcoin through an ETP structure overcomes the technical challenges associated with cryptocurrency such as setting up a wallet or trading on unregulated exchanges. It also removes the need to manage cryptographic keys or engage with blockchain technology.
On regulated markets, investors can buy and sell the ETC in the same way they would when trading conventional shares or ETPs, with similar regulatory protections and central counterparty clearing arrangements in place.
However, BTCE is more expensive with a total expense ratio 2.0% per year compared to conventional ETFs which typically incur annual costs of between 0.1 and 0.6%.
Approved by BaFin, the German financial regulator, BTCE is similar to physically-backed gold exchange traded commodities and allows investors the option for redemption in bitcoin. For every unit of BTCE, there is bitcoin stored in regulated, institutional-grade safe custody.
The launch comes after BaFin officially recognised cryptocurrencies as financial instruments in March. Custodians will now be required to obtain a license from the financial regulator to offer their services in the country.
Bradley Duke, CEO of ETC Group, said, “The crypto sector has been held back by concerns about complexity, accessibility and governance. With BTCE, we are transporting bitcoin into the fold of mainstream, regulated financial markets. Investors get the benefits of trading and owning bitcoin through a regulated security while having the optionality of redeeming bitcoin if they choose.”
There are a number of ETF issuers that offer bitcoin ETPs including WisdomTree which launched a bitcoin ETP on the SIX Swiss Exchange last December. Specialist crypto ETP issuers 21Shares, formerly known as Amun, and CoinShares also offer ranges.