The UK could become the largest cryptocurrency ETN market in Europe

According to Alex Pollak, head of issuer 21Shares in the UK and Israel, the UK could become the largest exchange-traded note market in Europe within three years, provided the regulator allows retail investors to purchase the products.

The London Stock Exchange launched a crypto market ETN on 28 May 2024, following regulatory approval from the Financial Conduct Authority. However, the FCA has only allowed professional investors to access this new market, banning retail investors.

Tom Stenhouse, LSE

Tom Stenhouse, head of equity trading product at the London Stock Exchange, said in an email to Markets Media that the new marketplace for crypto ETNs will allow access for professional investors in a transparent and highly regulated environment.

“From launch, we will list products from three issuers: 21 Shares, Invesco and WisdomTree,” Stenhouse added. “We look forward to welcoming additional issuers and investors to the market and expanding the range of products available as institutional demand for digital assets increases.”

Alexis Marinof, head of Europe at WisdomTree, said in a statement that the FCA approval could lead to greater institutional adoption of cryptocurrencies. Marinof said: “Many professional investors have been unable to gain exposure to Bitcoin and other cryptocurrencies due to regulatory limitations and uncertainty: we would expect FCA approval of the prospectus for our crypto ETPs to remove such barriers to ‘entrance.”

Pollak told Markets Media that crypto ETN listings mark progress for the UK and that the seal of approval from the FCA and LSE makes a difference for some investors.

“In the UK the dial will not move properly until the retail ban is lifted,” Pollak added. “I think the UK will become the largest cryptocurrency ETP market in Europe in the next three years if the retail ban is lifted.”

Ophelia Snyder, 21Shares

Pollak said the founders of 21Shares – CEO Hany Rashwan and President Ophelia Snyder – have focused on the UK as a strategic market from day one due to its innovation, active crypto community, size of the asset management and its position as a global player in the financial markets.

Snyder said in a statement: “The UK is one of the deepest and most liquid capital markets in the world. As institutional interest in cryptocurrencies grows, it is only natural that the London Stock Exchange hosts responsible and appropriately structured funds that offer access to these markets.”

Differentiator

21Shares celebrated its fifth anniversary in November 2023 and has listed more than 40 crypto ETNs in Europe. The issuer cross-listed in London four products already listed in Europe: a bitcoin ETN and an ether staking ETN with US dollar and euro exposures. The issuer had to submit a base prospectus to the FCA and then go through a listing application process with the LSE, as it was a new issuer to the stock exchange.

Alex Pollak, 21Shares

Pollak said this experience and track record is a differentiator for 21Shares.

“We had a crypto winter that gave us the opportunity to stress test our products,” he added. “Investors were able to trade seamlessly and our products weathered the cryptocurrency winter very successfully.”

He further said that this long experience is important to the capital markets team at 21Shares, as it helps ensure that crypto products are traded correctly.

“We have the same relationships with market makers who already trade our European products,” Pollak added. “We have the tightest spreads for crypto products listed on the LSE.”

Source: 21Shares

Furthermore, Pollak argued that 21Shares has an advantage as a crypto-native company. 21Shares has between $7 billion and $8 billion in assets under management, and Pollak said 99% of its business is in the cryptocurrency space. He added that another differentiator is the education provided by the companies, as the founders were passionate about ensuring they brought content and education to the market, as well as products.

“We typically target traditional investors who are looking to allocate some capital into cryptocurrencies,” he said. “The company has a great internal research team that can discuss cryptocurrencies and make them appealing and easily understandable to a mainstream audience.”

Expect 21Shares to list more crypto products in London. For example, the issuer has a product that combines gold and bitcoin, as well as basket and coin products.

“I think this is just the beginning of our journey in the UK,” Pollak added.

US cryptocurrency spot ETFs

21Shares was among the group of 11 issuers that launched a spot bitcoin ETF in the United States in January this year, following approval from the Securities and Exchange Commission.

ETC Group, the European issuer, said in a June 10 report that global Bitcoin ETPs saw net inflows of $2.2 billion last week, of which $1.8 billion related to Bitcoin spot ETFs alone. US Bitcoins. The report states: “US bitcoin spot ETFs have seen 20 consecutive trading days of positive net inflows so far.”

In a research report, 21Shares said May was an exciting month for cryptocurrencies, with institutional interest in bitcoin growing and inflows increasing after a quiet April.

“At the end of the first quarter, 937 professional investors owned $11 billion in US bitcoin spot ETFs, approximately 20% of total ETF assets,” 21Shares added. “In contrast, gold ETFs had just 95 professional investors in the first quarter following launch, representing less than 10% of the reach of bitcoin ETFs.”

21Shares went on to say that the most significant achievement of May was the SEC’s approval of the 19b-4 filings of Ethereum spot ETFs on May 23, which marked a “crucial milestone” for the securities industry. cryptocurrencies. However, the products are not marketable until the regulator approves the S1 documentation, which could take weeks or months.

“However, this moment signals a growing acceptance of Ethereum within regulated investment frameworks, potentially opening the market to significant flows from registered investment advisors and the local ETF market, with the latter valued at 8 trillion dollars,” the report states. “The approval of Ethereum represents a significant step forward, highlighting the value of its on-chain ecosystem of decentralized applications.”

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