US spot bitcoin ETF not impossible — just ask the rest of the world

With the first spot bitcoin ETF launching in Europe Tuesday, US investors were reminded once again that such a launch is not impossible.

Far from it, actually, as regulators in various jurisdictions have allowed such products to come to market in recent years.

For instance, Canada introduced the world’s inaugural spot Bitcoin ETF in February 2021, and Brazil in Latin America followed suit in June.

Even in Europe, where Jacobi Asset Management was technically first to offer a bitcoin ETF, other issuers — such as WisdomTree and 21Shares — have launched crypto exchange-traded notes (ETNs).

Still, the US Securities and Exchange Commission remains hesitant about approving a spot bitcoin ETF, having previously expressed concerns about potential fraud and market manipulation in that sector.

Last week, the SEC delayed its decision on a proposed ETF by Ark Invest and 21Shares. But the regulator still has other ETFs to approve, deny or request additional review time for in the upcoming weeks.

As that process continues, let’s take a look at the spot bitcoin ETFs that already exist.

Canada

Purpose Investments launched its Bitcoin ETF (BTCC) on the Toronto Stock Exchange in February 2021. The world’s first Bitcoin ETF backed by physically settled bitcoin, it crossed $1 billion CAD ($740 million USD) in assets under management a month after coming to market.

Evolve Funds Group launched its own bitcoin ETF (EBIT) a day later. The CI Galaxy Bitcoin ETF (BTCX) and the 3iQ CoinShares ETF (BTCQ), launched in March and April, respectively.

The Ontario Securities Commission’s (OSC) approval of the products came after the regulator grew more comfortable with investment-grade custody and infrastructure services, as well as a workflow to allow for daily liquidity, Ether Capital CEO Brian Mosoff previously told Blockworks.

Indeed, OSC CEO Grant Vingoe noted during a virtual event held by the Canadian Club of Toronto in May 2021 that major accounting firms were auditing the ETF holdings, adding that the product providers had appropriate custody solutions.

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Allowing ETFs to be purchased through registered dealers is “a better alternative than to have completely unregulated activities,” Vingoe said at the time.

Despite Purpose’s ETF quickly growing to $1 billion CAD ($740 million USD), assets into the vehicle have stalled there. The products by Evolve, Galaxy and 3iQ currently have combined assets under management of roughly $470 million CAD ($347 million USD).

Though the 3iQ fund quickly reached $1 billion (CAD) in assets just weeks after its launch, it now manages about $100 million in assets.

A CoinShares spokesperson said the fund — now called the 3iQ Bitcoin ETF — is no longer associated with CoinShares, noting its deal with 3iQ was terminated.

“We believe this is one of the reasons why the assets under management have significantly decreased,” the representative added.

A 3iQ spokesperson did not respond to a request for comment prior to publication.

Brazil

QR Asset Management launched Latin America’s first spot bitcoin ETF in Brazil in June 2021. The fund, which trades under the ticker QBTC11 on the B3 Stock Exchange in Sao Paulo, has 144 million Brazil Real (about $29 million USD) in assets under management.

“The purpose of the ETF is to provide exposure to bitcoin easily and securely,” QR tweeted at the time of launch. “…But, more importantly, QBTC11 places Brazil at the epicenter of the most modern financial regulation.”

Galaxy Digital launched a bitcoin ETF in Brazil in November 2022 through a partnership with Itaú Asset Management.

The IT Now Bloomberg Galaxy Bitcoin ETF (BITI11) has $15 million in assets under management, according to Bloomberg data.

Netherlands

Europe became the most recent continent to get a spot bitcoin ETF, though crypto ETNs have existed there for years.

ETNs, which fall under the broader exchange-traded product (ETP) label, are debt instruments typically collateralized by the underlying exposure, such as bitcoin.

Swiss Crypto ETP issuer 21Shares, for example, has $1 billion in assets under management across 37 products on 12 exchanges — in Switzerland, Germany and others. It brought the first bitcoin ETP to the Middle East last October, listing the product on the Nasdaq Dubai exchange.

The Jacobi FT Wilshire Bitcoin ETF, which originally planned to launch in 2022, is overseen by the Guernsey Financial Services Commission (GFSC). The fund trades under the ticker BCOIN on the Euronext Amsterdam exchange.

Unlike other spot bitcoin ETFs, BCOIN measures the energy usage linked to bitcoin in the fund. Jacobi then buys and retires corresponding Renewable Energy Certificates (RECs).

Potential for US bitcoin ETFs?

The exchanges that would list the latest wave of proposed US bitcoin ETFs said in filings they have “reached an agreement on terms” with Coinbase to enter into a surveillance-sharing agreement (SSA).

Such a deal “adequately addresses” the SEC’s market manipulation concerns, crypto firm SkyBridge argued in a Monday letter to the regulator.

Townsend Lansing, head of product at CoinShares, told Blockworks in an email that the SEC’s approval continues to depend on whether or not there is a surveillance sharing agreement with a regulated market of significant size.

“That in turn depends on the size of the CME market plus (for now) Coinbase,” he said. “We continue to believe it will be difficult to argue that those two markets alone will be sufficient to prevent possible market abuse in the spot market but it is not entirely impossible.”

Lansing noted he believes a US spot bitcoin ETF would eventually match the assets under management in bitcoin futures products (roughly $1 billion) — and could ultimately exceed that figure in 18 to 24 months.

Matt Hougan, chief investment officer of prospective spot bitcoin ETF issuer Bitwise, said during a webinar earlier this month that a US spot bitcoin ETF could attract $55 billion in net flows in its first five years on the market.

“It could be 2x that; it could be one-tenth that,” Hougan added. “But our view of ETF history and of the dynamics of the market says that’s something that’s in the ballpark of occurring.”

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