More and more crypto-backed, financial products have been hitting the market, though most of them are not yet accessible via a public exchange.
In the U.S., investors are still waiting on a bitcoin exchange traded fund (ETF) to be approved by the SEC. But, in Europe, investors already have a bitcoin-backed, exchange-traded product available via a public exchange such as the NASDAQ OMX.
In May of 2015, Sweden’s XBT Provider AB announced the authorization of Bitcoin Tracker One, the first Bitcoin-based security available on a regulated exchange. In October of the same year, it launched Euro-denominated Bitcoin-based security, Bitcoin Tracker EUR, available through Nasdaq Nordic.
Last week, Danish investors were given access to these ETNs, both Bitcoin Tracker One and Bitcoin Tracker EUR, via Copenhagen-based Saxo Bank. Similarly, the U.K.'s largest online trading platform, Hargreaves Lansdown, also gave investors access to Bitcoin ETNs this year.
XBT Provider is the issuer of the two Exchange Traded Notes (COINXBE & COINXBT), backed by bitcoin on Nasdaq OMX in Stockholm. Functionally, this means that XBT Provider issues certificates which track the price of bitcoin for delivery to investors who purchase the certificates on NASDAQ OMX. In June 2016, XBT Provider was acquired by asset management firm Global Advisors (Jersey).
XBT Provider is then responsible for ensuring that these certificates accurately mirror (with minimal tracking error) the price movement of the BTC/SEK and BTC/EUR exchange rate by purchasing bitcoin and storing it.
The notes offer investors a familiar route to gain exposure to the price movements of bitcoin without having to purchase or secure the bitcoin themselves.
In an interview with Bitcoin Magazine, Ryan Radloff, head of investor relations at XBT provider, discussed their Bitcoin ETN gave a look ahead at what may be in store for the future.
What is an exchange traded note?
Exchange Traded Notes are debt backed securities which offer investors exposure to the change in value of the underlying currency. In the case of XBT Provider, the strategy is to track the price movement of the BTC/SEK and BTC/EUR exchange rate. ETNs are usually listed on public exchanges and thus available for purchase via any broker with access to the listing exchange, in our case, NASDAQ OMX.
Why purchase a bitcoin ETN over regular bitcoin?
There are three major reasons to consider a bitcoin ETN over physical bitcoin.
1) Security – When you invest in bitcoin via an ETN, you are not responsible for ensuring the security of the bitcoin.
2) Speed and Convenience: The route to purchasing an ETN is via a familiar broker or brokerage platform and the ETN is listed on a trusted exchange. No new accounts are needed, no new verification steps required. So this means the ETN is often the fastest way to purchase exposure to bitcoin, presuming you do not yet have an account with a crypto-currency exchange.
3) Potential Tax Advantages – In the UK for instance, the bitcoin ETN is uniquely eligible for inclusion in a tax-advantaged SIPP account thus this type of investment in bitcoin may experience a more efficient tax treatment than simply purchasing bitcoin outright.
Is the product limited to a certain type of investor?
The access to the product is governed by your stock broker. First your broker needs to be able to offer access to NASDAQ OMX. Second, your broker needs to authorize you for trading such an instrument. Currently, this product is not available for offer to U.S. investors.
How has XBT Provider performed since launching?
Price is directly correlated with the movement in price of the bitcoin. Since the price of bitcoin was in the $200s when we launched and is currently over $4800, performance has been exceptional.
Any interested investor can find more information at XBTProvider.com or can contact their broker directly to find out whether they have access to the product. As with any investment decision, investors should perform their own due diligence and understand the risks associated with this (young) asset class prior to investing.