The BITC will have an expense ratio of 0.98% compared to CoinShares’ existing synthetic Bitcoin ETPs which charge 2%
Crypto asset manager CoinShares has announced the launch of a new physically-backed Bitcoin (BTC) exchange-traded product (ETP). Called the CoinShares Physical Bitcoin (BITC), the product will be listed on Switzerland’s principal stock exchange SIX today. Each unit of BITC will be backed with 0.001 BTC.
Exchange-traded products are types of securities that track underlying security, index or any other financial instrument. They are traded on exchanges similar to stocks. The share price of ETPs comes from the underlying investments that they track. Since BITC is physically-backed, it will directly hold the underlying asset to secure obligations.
Komainu, a joint venture between CoinShares, Ledger and Nomura will directly hold physical Bitcoins for BITC.
Explaining the difference between the firm’s existing Bitcoin products and the BITC, CoinShares’ head of product Townsend Lansing said, “synthetic ETPs are not 100% physically backed. They hold at least 75% of the exposure in physical Bitcoin, and the remaining 25% can be used to get Bitcoin futures or cash for liquidity purposes”. BITC, on the other hand, “will always be 100% physical“, said Lansing.
The executive further explained that a physically-backed ETP minimises credit risk as synthetic ETPs always carry some element of credit risk because of financial obligations.
“When we first launched a Bitcoin ETP, there was really the only way to do a Bitcoin ETP, i.e., a synthetic structure. We would now run both sets of products simultaneously, and investors can choose what they want“, he added.
CoinShares currently manages about $3.5 billion worth of assets and is one of the top Europe-based crypto asset managers. Its United States-based rival Grayscale has an AUM of more than $27 billion.
When asked why Bitcoin investment products are more popular in the US than in Europe, Lansing responded by saying that the US is a much larger market and thus, “a US product by definition is larger than its European equivalent“.
“I spent years doing commodity products and worked for a company that had for the longest time the largest Gold products, Gold ETPs in the European market, and they were four or five times smaller than the equivalent US products. So that is always something to realise“, said Lansing.
“The US is a single, unified financial market, one of the largest, if not the largest in the world in terms of sophistication and access“, he added.