Europe has beaten the U.S. with the roll-out of the first Bitcoin exchange-traded fund (ETF) as London-based Jacobi Asset Management today announced the product's listing on Euronext Amsterdam.
After receiving approval from the Guernsey Financial Services Commission (GFSC) in October 2021, the firm initially planned to launch its Bitcoin ETF product last year.
It, however, decided to postpone the launch, deeming it an inopportune time due to the collapse of the Terra ecosystem and the bankruptcy of the FTX crypto exchange.
Today, the Jacobi FT Wilshire Bitcoin ETF is finally live, trading under the ticker BCOIN. It charges investors a 1.5% annual management fee.
Fidelity Digital Assets handles custodial services for the fund, while Flow Traders takes on the role of market maker. Authorized participants include Jane Street and DRW.
“This fund has been designed to give institutional investors a simple, secure, and transparent access to Bitcoin whilst addressing their sustainability requirements," Jacobi CEO Martin Bednall told Decrypt. "We believe this ETF launch will be the catalyst for institutional adoption of digital assets."
Jacobi FT Wilshire Bitcoin ETF is also billed as the first decarbonized digital asset fund compliant with Article 8 of the European Sustainable Finance Disclosure Regulation (SFDR), which applies to funds promoting environmental and social objectives.
The firm partnered with digital asset platform Zumo to implement a verifiable built-in Renewable Energy Certificate (REC) solution, which offers institutional investors the ability to deal in Bitcoin while also meeting their Environmental, Social, and Governance (ESG) objectives.
As the Jacobi CEO explained to Decrypt, RECs, and offsets are inherently different and should not be confused. Whilst offsets can be used for any aspect of a company’s carbon footprint (one offset represents one tonne of CO2e), RECs relate to electricity consumption only (one REC represents 1 MWh of electricity).
The REC solution verifies the utilization of renewable energy sources, contributing to the fund's overall decarbonization and adherence to sustainable principles.
“This makes RECs an ideal tool to use for crypto, where the most material part of the carbon footprint relates to electricity consumption," Bednall told Decrypt. "Furthermore, the use of RECs is recognized under the Greenhouse Gas Protocol as a Market-Based accounting method and can be used to claim full decarbonization, whereas the same claim cannot be used for offsets.”
Jacobi makes leap from crypto ETNs
The firm emphasized that as an open-ended fund, its Bitcoin ETF will mark a major shift from the traditional exchange-traded notes (ETNs), to date the most widely spread structure in Europe for crypto-backed financial instruments.
One key distinction between an ETN and an ETF lies in the ownership structure and the nature of the investment. In the case of an ETF, shareholders possess a stake in the underlying assets held by the fund. ETN investors, on the other hand, own a debt-security.
“ETFs are approved by regulators and are overseen by regulated managers. These managers sign off all activities and report on a regular basis to the regulator. ETNs do not have such a party providing this level of investor protection,” Bednall told Decrypt.
ETFs are restricted from using leverage or incorporating derivatives, which helps mitigate the potential risks associated with market manipulation. Conversely, ETNs may incorporate leverage or derivatives, thereby introducing an additional layer of risk.
The launch of Jacobi’s Bitcoin ETF would also mean that European investors will be ahead of their American counterparts in accessing the much sought-after product.
Gemini, the crypto exchange helmed by the Winklevoss twins, was the first U.S.-based entity to apply for a Bitcoin ETF ten years ago, and American investors are yet to see any of such a product.
The U.S. Securities and Exchange Commission (SEC) has repeatedly rejected or postponed any application it received, citing, among other concerns, market manipulation.
There's renewed hope that, after years of rejections, a Bitcoin ETF in the U.S. will eventually receive regulatory approval.
A new wave of applications recently reached the SEC's door, beginning with Wall Street giant BlackRock's entry into the space last month and followed by more filings submitted by Fidelity, Valkyrie, and Invesco among others.