Invesco, a U.S. investment firm with $1.3 trillion in assets under management, has partnered with crypto indices provider CoinShares to launch its first European exchange-traded product (ETP) backed by physical Bitcoin.
An ETP is somewhat similar to an exchange-traded fund (ETF) as it tracks the performance of an underlying asset or financial instrument. More importantly for traditional investors, these financial instruments make it easier to gain exposure to crypto without having to hold the asset itself. Crypto-backed ETPs are gaining traction in Europe too, particularly in Germany and Switzerland.
Listed on Deutsche Börse Xetra, Germany’s stock market for equities and exchange-traded funds, the Invesco Physical Bitcoin ETP (BTIC) is 100% backed by holdings in the underlying asset.
BTIC tracks the CoinShares Bitcoin Hourly Reference Rate index to deliver its price performance, less a fixed 0.99% annual fee. Custody services for the new product are provided by Zodia Custody, a UK-based digital asset company registered with the Financial Conduct Authority (FCA).
Invesco was one of the first U.S. firms to apply for a Bitcoin futures ETF in August, soon after the Security and Exchange Commission (SEC) chair Gary Gensler indicated a preference for such a product rather than a physical Bitcoin ETF tied to the actual asset.
The firm, however, decided not to pursue its futures application in October, citing the regulator’s insistence on 100% exposure to Bitcoin futures alongside other reasons.
Invesco pivots Bitcoin ETF
Commenting on a decision to go for a physical Bitcoin ETP in Europe rather than a Bitcoin futures-based product, Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, stated that “physical Bitcoin is a more observable marketplace.”
“One of our concerns was the depth of synthetic liquidity as well as what that may do to valuations over time and that is something we were not wholly comfortable with,” Buxton said in an interview with ETF Stream.
He also revealed that BTIC has been in the works since mid-2018, with Invesco “trying to structure a product that looked, from an institutional point of view, as close as possible to a traditional ETF.”
According to Buxton, most of the discussions Invesco held with clients have been about ways to get exposure to the world's leading cryptocurrency and how to be comfortable with its valuation.
Meanwhile, on the domestic front, Invesco still hopes to get approval for its application for a spot Bitcoin ETF submitted jointly with Galaxy Digital in September.
However, with the SEC yet to greenlight any such product, a move for European Bitcoin ETP may seem justified—at least from the investors’ perspective.