Despite Bitcoin ETF fever, EU remains skeptical of crypto investments – Van Eyck Europe CEO
The launch of spot bitcoin exchange-traded funds (ETFs) in the United States is having an impact on Europe, but investors on the continent are wary of investing in the cryptocurrency space.
VanEck Europe CEO Martijn Rosemüller exclusively told Cointelegraph that interest from institutional investors in the U.S. is increasing in spot Bitcoin (BTC) ETFs, painting a contrasting picture of the European landscape.
American investors are more willing to take educated risks. They are still more used to trading on exchanges than some European investors whose bank or fund manager once advised them.
VanEck Europe's CEO highlights key differences in outlook for the cryptocurrency sector on both sides of the Atlantic. European crypto-enthusiast investors typically include retail users, small independent wealth managers and family offices;
“It is primarily a retail business because many large financial institutions are still reluctant to use any crypto-related products in their regular portfolios.”
Rosemüller added that although Europe has several exchange-traded notes (ETNs) properly licensed, local regulators “clearly” do not support crypto-related investments.
Why Europe has no place for Bitcoin ETFs
Although European regulatory frameworks do not allow investment products based on a single underlying asset, the agitation surrounding the approval of spot Bitcoin ETFs has spilled over into markets outside the US.
Rosemüller explains that the reason for this lies in the European Union's UCITS regulation.
“Particularly under UCITS, an ETF cannot have a single exposure under it. There are two rules for diversity in the framework,” Rosemüller said.
The CEO of VanEck Europe stated that the reality of a Bitcoin ETF is unlikely from this point of view, saying that the underlying asset must have an international securities identification number to qualify as an ETF.
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VanEck Europe's efforts to launch investment products with direct exposure to Bitcoin and other cryptocurrencies required a new approach. This includes a variety of exchange traded products (ETPs), which ensure that clients are offered liquidity in the open market independent of the issuer.
“This is good because it ensures that there is a clear price discovery, so you don't have cases like grayscale products where there may be a large premium or discount in the US,” Rosemüller explains.
A variety of investment products, including exchange-traded commodities and ETNs, allow for a variety of offerings. ETN structures, according to Rosemüller, allow companies like VanEick to embed assets like bitcoin in the product.
“From a practical point of view, the ETN is traded very similarly to an ETF, so there is no significant difference. We don't use futures contracts, there is only a place for Bitcoin in the product. But from a legal point of view, the ETN is a debt instrument,” Rosemuller said.
The VanEck Europe Bitcoin ETN is very similar to the spot Bitcoin ETF offerings in the United States. The product offers exposure to BTC in cold storage at BankFreak in Liechtenstein. The company has launched Ethereum, Solana, Avalanche and Tron ETNs that are similarly structured.
Exposure to crypto companies
Beyond crypto-based ETNs, VanEck's Crypto and Blockchain Innovators UCITS ETF (DAPP) aims to provide investors with exposure to various listed cryptocurrency exchanges, miners and infrastructure companies in the broader blockchain space.
Alessandro Rollo, VanEck product manager and author of the Blockchain White Paper, provided details of the fund in a chat with Cointelegraph. The DAPP ETF is heavily weighted to Bitcoin miners, with 50% of the fund's net assets consisting of shares in companies including Riot Blockchain, Marathon Digital and Argo Blockchain. Rollo added:
“We also have crypto exchanges, particularly Coinbase and companies like MicroStrategy, that have decided to hold more bitcoins on their accounts.”
Rollo added that the ETF tracks an underlying index managed by Market Vector, which is rebalanced quarterly, allowing VanEick to explore potential new opportunities.
To be included in a DAPP ETF, a crypto company's shares must earn at least 50% of their income from digital assets or related activities. Or, as a microstrategy, they must hold at least 50% of their assets on the balance sheet in the form of cryptocurrencies.
Boomer getting into Bitcoin
Cointelegraph questioned the need and demand for a cryptocurrency ETP or ETF product when average retail investors can trade or hold various tokens offered by exchanges and trading platforms.
Rosemüller noted that concern about raising one's own, especially involving exposure to Bitcoin or other cryptocurrencies, is a sentiment shared by other “boomers” and older investors.
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“There were a lot of investors like me who had some potential but weren't comfortable enough with buying on a crypto exchange and had to fend for themselves who had those exchange stories hacked or lost their hard drives,” Rosemuller said.
A variety of products offered by investment firms that offer exposure to cryptocurrencies at arm's length represent a middle ground. Protection is managed by services with experience and a good track record, and the product itself is typically available in a conventional investment account.
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