Casey Wagner

<div id="highlights-block_6214077453785" class="highlights">
 <ul>
 <li>While US investors wait for a physically-backed ETF, exchange-traded products are dominating in Europe</li>
 <li>The ETP structure is often the only option that fits regulatory guidelines, issuers say</li>
 </ul>
 
</div>



With the prospects of a physical bitcoin ETF at a standstill in the US, an already-crowded market for cryptocurrency exchange-traded products (ETPs) in Europe is heating up with a series of new listings.



Digital asset-linked ETPs in Europe surpassed $1 billion in inflows in 2020 with demand showing no signs of slowing, according to Bloomberg Intelligence <a href="https://www.bloomberg.com/professional/blog/europes-crypto-etps-show-theyre-for-real-with-1-billion-euros/" target="_blank" rel="noreferrer noopener">data</a>. In the week ending Feb. 11, European crypto investment products saw inflows of more than $80 million, according to CoinShares <a href="https://coinshares.com/research/digital-asset-fund-flows" target="_blank" rel="noreferrer noopener">data</a>.



Issuers say the interest is no surprise. The security and convenience of crypto exposures via a regulated product is attractive to retail investors — and often a necessity for institutional players.



“There are a lot of investors who don&#8217;t want to open up wallets on exchanges or otherwise deal directly with crypto. They much prefer to simply use traditional access rails of their brokerage accounts,” said Townsend Lansing, head of product at CoinShares. “That&#8217;s primarily driving the demand for these as opposed to a direct investment in, say, bitcoin.”



Fidelity International became <a href="https://cms.blockworks.co/21-shares-expands-crypto-etps/" target="_blank" rel="noreferrer noopener">the latest</a> issuer to offer a European ETP earlier this month with the launch of its Fidelity Physical Bitcoin ETP (FBTC) on Germany&#8217;s Deutsche Börse Xetra. 21Shares, the largest ETP issuer in the world, <a href="https://cms.blockworks.co/21-shares-expands-crypto-etps/" target="_blank" rel="noreferrer noopener">brought three new decentralized finance (DeFi)</a> products to European markets in recent weeks.



Jersey-based crypto asset manager CoinShares has a host of products trading on European exchanges, including two new ones focused on <a href="https://cms.blockworks.co/coinshare-launches-new-etps/" target="_blank" rel="noreferrer noopener">staking opportunities</a>. Other issuers including Invesco and Wisdom Tree also have products in the European markets.



The setup may be a boon for institutions with stringent compliance rules around cryptocurrencies.



“Institutions have all their access rails well established,” Lansing said. “They have their risk committees, their lawyers, their compliance, they understand how securities markets work. I think the uptake for institutional investors, all the way from private banks to multi-asset mutual funds, the speed that uptake is going to be helped a lot by their familiarity with how the exposure is wrapped.”



The ETP wrapper is also often the only way for issuers to list on European exchanges.



“It&#8217;s often against the rules in Europe to have an ETF on a single asset,” said Hany Rashwan, CEO of 21Shares. “In Europe, they&#8217;re classified as either exchange-traded commodities or exchange-traded products.”



The classification around naming these types of investment vehicles is less important than how the products are structured, Rashwan said.



“What investors are ultimately looking for is physically-backed access to crypto in vehicles and wrappers that make the most sense for that,” Rashwan said.



All of 21Shares’ ETPs trading in Europe are physically-backed, allowing for the products to more closely track the price of the underlying assets, he added.



In the US, bitcoin futures-based ETFs and exchange-traded trusts, such as the Grayscale Bitcoin Trust (GBTC), are often criticized for imperfectly tracking the price of the underlying asset. GBTC often trades at a discount or premium to bitcoin, while futures-based ETFs run the risk of roll costs.



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With US Bitcoin ETF in Limbo, Crypto Exchange-traded Products All the Rage in Europe

Ben Strack

<div id="highlights-block_620bd47379bfc" class="highlights">
 <ul>
 <li>Since 1980 the firm has operated independently of US-based Fidelity Investments, which still seeks to launch a spot bitcoin ETF</li>
 <li>Fidelity International’s bitcoin ETP began trading in Germany on Tuesday and is expected to launch in Switzerland in the coming weeks</li>
 </ul>
 
</div>



Another bitcoin exchange-traded product carrying the Fidelity name has launched — just not the one some US investors are waiting for.



Bermuda-based Fidelity International, which manages roughly $800 billion in client assets, is launching the Fidelity Physical Bitcoin ETP (FBTC) for its professional and institutional clients in Europe.



Once a subsidiary of US-based Fidelity Investments, Fidelity International has operated independently of the company since 1980.



The offering began trading on the Deutsche Börse Xetra in Germany Tuesday, according to the firm, and is expected to begin trading on the SIX Swiss Exchange in the coming weeks. FBTC will cost investors 75 basis points.



Distributed ledger technology has the potential to revolutionize the financial system and disrupt many parts of the financial world, with profound implications for investors, Fidelity International Managing Director Christian Staub said in a statement.



“We are initially providing investors access to the world’s largest cryptocurrency, bitcoin, but we constantly review our product range and will consider further products and services, subject to client demand,” a Fidelity International spokesperson told Blockworks in an email.



Fidelity Digital Assets, a company that Fidelity Investments launched in 2018, serves as custodian of the Fidelity Physical Bitcoin ETP.



A Fidelity Digital Assets survey published last year found that roughly 90% of institutional investors interested in digital assets expect to have an allocation to the space within the next five years.



Fidelity Investments’ Canadian subsidiary <a href="https://cms.blockworks.co/fidelity-set-to-launch-spot-bitcoin-etf-in-canada/" target="_blank" rel="noreferrer noopener">launched</a> an ETF in December that invests directly in bitcoin.



Despite the slew of spot crypto ETP launches abroad in recent months, the Securities and Exchange Commission has not yet approved a spot crypto ETF in the US. The agency <a href="https://www.sec.gov/rules/sro/cboebzx/2022/34-94080.pdf" target="_blank" rel="noreferrer noopener">denied</a> Fidelity Investments’ Wise Origin Bitcoin Trust last month.



“We reaffirm our belief in market readiness for a physical bitcoin exchange traded product and look forward to continued constructive dialogue with the SEC,” a spokesperson told Blockworks at the time.



As it awaits approval for its US spot bitcoin product, Fidelity Investments — with nearly $4.5 trillion of discretionary assets as of Dec. 31 — <a href="https://cms.blockworks.co/fidelity-plots-crypto-etfs/" target="_blank" rel="noreferrer noopener">filed for a pair of ETFs</a> that would invest in companies involved in the metaverse and the broader crypto industry.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.