After a year of strategic planning and navigating the rollercoaster of the cryptocurrency market, Jacobi Asset Management is finally on course to debut Europe’s first Bitcoin Exchange Traded Fund (ETF).
Initially set to launch in July 2022, the ETF is now expected to hit the Euronext Amsterdam this month.
Setting a New Course in Europe’s Crypto Market
Instead of being deterred by the Terra Luna cryptocurrency crash in May 2022 and the collapse of crypto exchange FTX in November, Jacobi recalibrated its timeline.
The asset management firm recognized a pivotal shift in demand since last summer and deemed now to be the perfect moment for launching its Bitcoin ETF.
Unlike previous digital asset exchange traded products in Europe, which have all been structured as exchange traded notes (ETNs), Jacobi’s offering is a bona fide fund.
This means that ETF shareholders will have ownership over a portion of the fund’s underlying shares, in contrast to ETN investors who merely own a debt security without a stake in the underlying assets.
Peter Lane, co-founder and COO of Jacobi, expressed concerns last year about the misuse of the term “ETF” by ETN issuers. He believes this was an attempt to veil the inherent risks involved in investing in ETNs.
To differentiate their product from ETNs, Jacobi emphasized that their ETF cannot employ leverage or use derivatives, which might otherwise introduce significant counterparty risk.
Guernsey: The Ideal Launchpad for Bitcoin ETF
To facilitate the smooth launch of its Bitcoin fund, Jacobi chose Guernsey as the fund’s base. David Crosland, a partner at offshore law firm Carey Olsen, pointed out that Guernsey provides numerous benefits as a fund servicing jurisdiction.
Its quick adaptability and intricate understanding of complex details have allowed Jacobi to launch a regulated fund that other European jurisdictions could not.
Michael O’Riordan, founding partner of Blackwater Search and Advisory, noted that regulatory hurdles for introducing a Bitcoin ETF in Europe were substantial, especially considering that Bitcoin isn’t deemed an eligible asset under Ucits rules.
However, despite some structural differences, ETFs and ETPs are quite alike, causing a lot of market confusion, which the industry hasn’t done well to address.
The digital assets ETP landscape in Europe has seen impressive growth over the past 18 months, with net flows reaching $483 million. The third quarter of 2022 alone witnessed inflows of $398 million, according to data from Coinbase and Bloomberg.
Meanwhile, the assets held in European digital assets ETPs currently amount to €4.3 billion, having peaked at a staggering €10.5 billion at the end of 2021.
In this dynamic environment, Jacobi’s debut of Europe’s first Bitcoin ETF signifies a critical step forward for the European digital asset market. The launch may herald an exciting era for investors as it introduces a new, direct ownership opportunity in the world of cryptocurrencies.
