Earlier this week, financial services company ETC Group launched an Ethereum exchange-traded product (ETP). ETC Group CEO Bradley Duke told Decrypt he believes the demand for Ethereum is growing, and his goal is to provide investors with options to enter the Ethereum market.
“There’s increasing demand for Ethereum, and I have faith in the team behind Ethereum,” Duke said, adding that the smart contract platform represents a “whole, programmable banking system and allows for all sorts of innovation.”
An ETP allows investors to gain exposure to a tradable security without having to buy it directly. The company already has a Bitcoin ETP, which launched in June 2020 and has already generated $1 billion in assets under management. But now, ETC Group is pivoting its attention to Ethereum.
ETC, unsurprisingly, has high hopes for its new Ethereum product; the company’s Bitcoin ETP was the most traded product out of the exchange-traded notes listed on Xetra during the second half of 2020. Its Ethereum ETP launched on Deutsche Borse’s Xetra—a trading venue based in Frankfurt, Germany—under the ticker ZETH.
As impressed as Duke is with the Ethereum network, he said what matters more than his own view is the fact ETC Group is providing investors a route into a major cryptocurrency, one that is often touted as Bitcoin’s main rival. “More important than my opinion, what we’re doing is providing the picks and shovels—it’s up to the investor to decide,” he said.
And while both ETPs offer competing cryptocurrencies, their structures are mostly the same. “The ETH product is pretty much structurally identical to the BTC product,” Duke said, emphasizing that investor security is built into the product itself. In other words, the security is 100% backed by the underlying asset, something that’s true of both ETC’s ETP products.
The company’s ETPs might be based out of Germany, but Duke also had some choice words for the UK’s financial services regulator, the Financial Conduct Authority.
Crypto regulation in the UK
Duke said the FCA’s decision to ban crypto derivatives for retail investors implies the UK is not open for business.
“I think that’s great news for the rest of Europe, and it’s not great news for the UK,” he said, adding that London’s place as “the hub of the crypto industry in Europe” is likely to diminish over time.
What’s more, while Duke believes that the FCA’s ban sprang from the best of intentions, he suggested that its policy will have the opposite effect to what it intended. “What they’ve done is they’ve forced retail investors to invest in unregulated markets,” he said.
The loss of the UK retail investor is “unfortunate,” according to Duke, but despite that, the ETC Group’s products are passported all across Europe. Coupled with the fact that institutional money is pouring into crypto—and of course, that retail investors across the EU can access the company’s products—the loss of the UK retail investor is not that painful.