The introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States is having an impact on Europe, but investors on the continent remain cautious about investing in the cryptocurrency space.
Martijn Rozemuller, CEO of VanEck Europe, discussed the growing interest from institutional investors in spot Bitcoin ETFs in the US, highlighting the contrasting situation in Europe. He stated that US investors are more willing to take educated risks and are more accustomed to trading on exchanges compared to some European investors who still rely on mutual funds. According to Rozemuller, Europe’s interest in cryptocurrencies is mostly driven by retail users, smaller independent wealth managers, and family offices.
Rozemuller explained that while Europe has licensed exchange-traded notes (ETNs), local regulators have explicitly stated their disapproval of crypto-related investments. The reason for the absence of spot Bitcoin ETFs in Europe is the Undertakings for Collective Investment in Transferable Securities (UCITS) regulation. Under UCITS, it is not possible to have an ETF with a single underlying asset. There are rules regarding diversification within the framework. Additionally, an underlying asset needs to have an International Securities Identification Number (ISIN) to be eligible as an ETF.
To overcome these limitations, VanEck Europe has adopted an innovative approach to launch investment products with direct exposure to Bitcoin and other cryptocurrencies. They offer a range of exchange-traded products (ETPs) that ensure customers are served by a liquidity provider independent of the issuer in an open market. This approach ensures transparent price discovery and avoids issues such as huge premiums or discounts. Rozemuller emphasized that, from a practical perspective, there is no significant difference between an ETN and an ETF, as they are traded in a similar way. However, legally, an ETN is considered a debt instrument.
VanEck Europe’s Bitcoin ETN closely resembles spot Bitcoin ETF offerings in the US. The ETN offers exposure to BTC, which is held in cold storage by Bank Frick in Liechtenstein. The company has also launched ETNs for Ethereum, Solana, Avalanche, and Tron, which have similar structures.
In addition to their crypto-based ETNs, VanEck offers the Crypto and Blockchain Innovators UCITS ETF (DAPP), which provides investors with diversified exposure to listed cryptocurrency exchanges, miners, and infrastructure companies in the wider blockchain space. The ETF has a significant weight towards Bitcoin miners, with around 50% of its net assets comprised of shares in firms such as Riot Blockchain, Marathon Digital, and Argo Blockchain.
Rozemuller addressed the need for cryptocurrency ETPs or ETFs, noting that many retail investors, particularly older generations, are not comfortable with self-custody and the risks associated with it. Offering investment products that provide exposure to cryptocurrencies through reputable services and conventional investment accounts presents a middle ground for these investors.
Overall, the launch of spot Bitcoin ETFs in the US has influenced the European market, but regulatory frameworks and investor attitudes have limited the availability of such products in Europe. VanEck Europe has introduced innovative investment products, including ETNs and the DAPP ETF, to provide European investors with exposure to cryptocurrencies in a regulated and accessible manner.