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Bitcoin, following last month’s SEC approval, is now officially recognized as a commodity in the US and can be invested in through traditional exchanges. This approval’s biggest advantage was addressing the legitimate concerns of investors who wanted to be isolated from storage risks, and these concerns have been alleviated. Moreover, even though the SEC rejected it, the approval of a spot Bitcoin ETF has also certified its legitimacy by the government.
Europe and Spot Bitcoin ETF
With the US’s approval, Bitcoin and the broader cryptocurrency space have risen from the underground to Wall Street. Therefore, the ETF approval in January was perhaps the most significant development in the history of cryptocurrency. But will we see the same in Europe? VanEck Europe CEO Martijn Rozemuller paints a bleak picture.
“US investors are more willing to take educated risks. In addition, they are more accustomed to trading on exchanges compared to some European investors who were once tied to investment funds recommended by their banks or fund managers.”
In terms of demand, Europe is quite weak as the latest report on crypto investment products showed that 99% of the entries into professional crypto investment products last week came from the US.
Challenges in Approving Spot Bitcoin ETF
VanEck Europe CEO emphasizes the contrast in approach between the two ends of the world specific to crypto. Europe’s crypto-curious investors are generally individuals and smaller independent asset managers.
“It’s mostly individual investors because many of the large financial institutions are still reluctant to use any crypto-related products in their standard portfolios.”
While the region has crypto papers/securities (ETPs), the authority’s clearly expressed reluctance is deterring for institutions. Moreover, the European region does not allow investment products based on just a single underlying asset. Rozemuller states that this is due to Europe’s Undertakings for Collective Investment in Transferable Securities (UCITS) regulation.
“Especially under UCITS, it is not possible to obtain an ETF that has a single risk underneath. There are a few rules when it comes to diversification within the framework.”
Perhaps after a period of monitoring the performance of Bitcoin ETFs, the appetite will jump to Europe, and the necessary steps will be taken. We agree that we are still in the early stages, as the process of defining and regulating cryptocurrencies as a new asset class has not yet been completed on a global scale.
