The ETC Group, a company established by experienced financial services professionals, announced on June 9, 2020 that they will be listing the world’s first “centrally cleared” Bitcoin ETC, BTCetc Bitcoin Exchange Traded Crypto – (BTCE) on Deutsche Börse’s XETRA platform.
As noted in a release shared with CI:
“The exchange traded cryptocurrency (ETC) tracks the price of Bitcoin and is 100% physically backed.”
The new Bitcoin (BTC) product aims to provide investors a safe and transparent way to gain exposure to the flagship cryptocurrency, which regularly experiences high levels of volatility and can be too technical for many users to properly manage.
This is reportedly the first crypto-related product to launch on Deutsche Börse Xetra.
The structure of the ETF, which is traded on regulated markets, allows investors to purchase and sell the ETC in the same manner that they would when trading conventional shares or ETPs, with “the identical regulatory protections in place.”
Professional investors expect features like CCP clearing when they trade on compliant platforms. BTCE aims to bring this same high standard to Bitcoin trading.
The release noted that clearing via CCP “greatly” reduces counterparty risk when trading BTCE.
BTCE has been approved by BaFin, Germany’s financial regulator. It’s structured as an ETC that is “physically backed by Bitcoin.”
As explained in the release:
“Each unit of BTCE gives the holder a claim on a predefined amount of Bitcoin – a structure very similar to physically-backed gold exchange traded commodities, and allows investors the option for redemption in Bitcoin.”
For every unit of BTCE in circulation, there is reportedly Bitcoin kept in regulated, “institutional-grade” safe custody. The ETC structure is based on “a transparent and verifiable” process to ensure that the provenance of all BTC kept in custody has been “strictly vetted.”
BTCE are held with an investor’s securities broker or banking service provider, which should remove the risk of losing the investment that could happen if investors are not familiar with managing cryptographic keys.
BTCE is traded on XETRA, which is one of the world’s largest exchanges and is supported by a network of Authorized Participants (APs) and Market Makers. The APs aim to ensure adequate on-exchange liquidity and “tight spreads,” allowing investors to buy in all sizes without being concerned about the market impact.
As noted in the announcement, trading will be centralized on XETRA, “drawing liquidity from the many fragmented cryptocurrency exchanges.”
On March 2 2020, BaFin said it would officially recognize cryptocurrencies as “financial instruments.”
The release confirmed that BTCE will be distributed and marketed via HANetf’s white label ETF issuance business.
HANetf is a business established by ETF industry professionals. It has issued a cloud computing ETF and a medical cannabis ETF.
Bradley Duke, CEO at ETC Group, stated:
“The crypto sector has been held back by concerns about complexity, accessibility and governance. With BTCE, we [aim to] transport Bitcoin into the fold of mainstream, regulated financial markets. Investors get the benefits of trading and owning Bitcoin through a regulated security. while having the option of redeeming Bitcoin if they choose.”