U.S Approves Bitcoin ETFs: Examining Europe's Next Moves in Crypto Investment
Summary:
The U.S Securities and Exchange Commission (SEC) has given the green light to a series of Bitcoin (BTC) exchange-traded funds (ETFs) for trading on U.S stock markets. These ETFs provide a regulated conduit for retail and institutional investors to Bitcoin exposure. The question remains about whether Europe is ready to follow suit, with current regulations making it difficult for ETFs investing solely in Bitcoin to gain approval. However, Europe is already well-advanced in offering alternative crypto investment avenues, such as exchange-traded notes (ETNs) and alternative investment funds (AIFs), offering both retail and institutional investors regulated access to cryptocurrency investments.
Following a lengthy period of anticipation and over 20 declined applications, the U.S Securities and Exchange Commission (SEC) has authorized a series of Bitcoin (BTC) exchange-traded funds (ETFs) for trading on American stock markets. These ETFs track the world's leading cryptocurrency through direct purchase and possession of Bitcoin, offering a 1:1 ratio. Previously, only Bitcoin futures ETFs, which track Bitcoin futures contracts rather than the actual cryptocurrency price and do not hold real Bitcoins, were approved in the U.S. The recently authorized spot ETFs provide both retail and institutional investors with a regulated, simple method to invest in Bitcoin without the need to purchase and store the cryptocurrency themselves. As regulated investment tools, the ETFs are subject to the SEC's rules and abide by the same regulations for investment funds.
However, the question arises about the prospect of a Bitcoin ETF in Europe. Is the European Union ready to replicate U.S' move, or will EU investors have to wait?
Investing in Bitcoin in Europe remains relatively complicated despite familiar platforms such as Bison, Bitpanda and eToro. They are not suitable for larger investors seeking traditional structures due to the fact that if an ETF invests solely in Bitcoin, it will not get approval in Europe under the Undertakings for Collective Investment in Transferable Securities (UCITS) regulation.
Investors in the EU needing to invest in the crypto market have to depend on alternative products, including Bitcoin exchange-traded notes (ETNs). Despite the likelihood of customer funds being lost in case of issuer's insolvency, the benefits of ETNs are that they are easily tradable on known exchanges like Deutsche Börse's Xetra, Euronext Amsterdam or the SIX Swiss Exchange.
For institutional investors, financiers can offer Alternative Investment Funds (AIFs). AIFs can directly invest in cryptocurrencies. However, this is an actively managed product that is only accessible to institutional investors.
The likelihood of Bitcoin ETFs being approved in Europe in the single-asset form as in the U.S is slim. However, an ETF based on a crypto index comprising various cryptocurrencies could be a possibility once recognized crypto indexes that meet the UCITS requirements are established.
Europe is considerably ahead of the U.S in offering regulated access to crypto investments for both retail and institutional investors, despite the absence of a Bitcoin ETF.
Published At
3/6/2024 3:47:00 PM
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