Invesco, a U.S. investment firm with $1.3 trillion in assets under management, has teamed up with cryptocurrency index provider CoinShares to launch its first European exchange-traded product (ETP) backed by physical Bitcoin.
An exchange-traded product (ETP) is similar to an exchange-traded fund (ETF) in that it tracks the performance of an underlying asset or financial instrument. More importantly, for traditional investors, these financial instruments make it easier to gain exposure to cryptocurrency without actually holding the asset. Crypto-backed ETPs are becoming more popular in Europe, particularly in Germany and Switzerland.
The Invesco Physical Bitcoin ETP (BTIC), which is listed on Deutsche Börse Xetra, Germany’s stock exchange for equities and exchange-traded funds, is 100 percent backed by holdings in the underlying asset.
BTIC’s price performance is based on the CoinShares Bitcoin Hourly Reference Rate index, less a fixed 0.99 percent annual fee. Zodia Custody, a UK-based digital asset company registered with the Financial Conduct Authority, is providing custody services for the new product (FCA). nches ETP for European Spot Bitcoin
Invesco was one of the first firms in the United States to apply for a Bitcoin futures ETF in August, shortly after SEC chair Gary Gensler indicated a preference for such a product over a physical Bitcoin ETF tied to the actual asset.
However, in October, the firm decided not to pursue its futures application, citing the regulator’s insistence on 100 percent exposure to Bitcoin futures as one of the reasons.
Invesco repositions its Bitcoin ETF
Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, stated that “physical Bitcoin is a more observable marketplace” in response to the decision to go with a physical Bitcoin ETP rather than a Bitcoin futures-based product in Europe.
“One of our concerns was the depth of synthetic liquidity as well as what that might do to valuations over time, and that was something we were not entirely comfortable with,” Buxton told ETF Stream.
He also revealed that BTIC has been in development since mid-2018, with Invesco “trying to structure a product that looked, from an institutional standpoint, as close to a traditional ETF as possible.”
According to Buxton, the majority of Invesco’s client discussions have been about how to gain exposure to the world’s leading cryptocurrency and how to be comfortable with its valuation.
Meanwhile, on the domestic front, Invesco is still hoping for approval of its application for a spot Bitcoin ETF, which it submitted in collaboration with Galaxy Digital in September.
However, with the SEC yet to approve any such product, a move for European Bitcoin ETP may appear justified—at least from the perspective of investors.