With Ethereum ETFs poised to rock the US market, Europe asks ‘what took you so long?’

With Ethereum ETFs poised to rock the US market, Europe asks ‘what took you so long?’
Europe has multiple Ethereum exchange-traded products on the market. Credit: Andrés Núñez/DLNews.
  • Europe has many crypto exchange-traded products on the market.
  • The UK launched an Ethereum ETP this week.
  • European investors aren’t that interested in crypto ETPs.

In the US, the crypto industry is buzzing in anticipation ahead of an expected approval of spot Ethereum exchange-traded funds.

But nations across the Atlantic are already miles ahead with similar crypto investment products.

The London Stock Exchange, for one, will begin handling Bitcoin and Ethereum exchange-traded products for the first time by the end of May.

Numerous ETPs

And in Europe, there are already multiple Ethereum financial products, or ETPs, on the market. They include exchange-traded notes and exchange-traded commodities, which operate in similar ways to ETFs.

But the products, which have been on the market for years, haven’t caught much steam. That’s because Europeans are less keen on risky investments and prefer stability, experts say.

“If we’re talking about where’s the alpha going to come from, it’ll be the place with the deeper capital markets and more eager investor base driving the inflows to push these things upward,” Erwin Voloder, head of policy at the European Blockchain Association, told DL News.

Digital asset investment firm 21Shares launched its Ethereum Staking ETP in 2019, and Ethereum ETPs from VanEck and CoinShares made their debutsin 2021.

But inflows are relatively small.

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The 21Shares’ Ethereum ETP has over $307 million assets under management, and VanEck’s has a total net assets of $175 million.

Meanwhile, in the US, institutional investors are already prepared to pour $500 million into Ethereum ETFs over the next week if they are approved, according to an analysis by the OKX exchange.

Enthusiasm in the US

The products follow the price of Ether and allow investors a way into crypto through a bank or investment firm without having to open a crypto wallet or an account with a crypto platform.

For proponents, crypto ETFs and ETPs provide digital assets with validation and a bridge to broader financial markets.

The US Securities and Exchange Commission approved 11 Bitcoin spot ETFs in January. The two biggest funds, launched by BlackRock and Fidelity Investments, have vacuumed up more than $30 billion between the two of them as of Thursday.

But there are stark differences between Europe and the US.

Europe has “more of an ecosystemic approach” to innovative finance, according to Voloder.

With legal frameworks for crypto assets starting to come into effect this year and other investment guidelines from regulators, lawmaking sets the foundations.

‘Even if Europe has the regulations, our investor base has always lagged behind America.’

—  Erwin Voloder

“EU regulators are more proactive and US regulators are more reactive which is why you see broker dealers launching digital asset structured products in Europe,” Voloder said.

“Regulations enable innovation and experimentation,” he added. This is what allows financial institutions to test tokenised financial instruments.

But still the size of the capital markets is reflected by that underlying divergence.

“Even if Europe has the regulations to enable innovation, our investor base has always lagged behind America,” Voloder said.

Crypto ETPs beyond Ethereum

Cardano Staking ETP by Liqwid began trading on Deutsche Börse exchange group on Wednesday. The product is domiciled in Switzerland.

“Switzerland is at the forefront, as staking is regulated here, allowing us to build products incorporating staking—something not yet possible in the US,” Florian Volery, co-founder of Liqwid Finance, told DL News in an email. He is hopeful that the US will eventually catch up.

The DeFi entrepreneur expects to see actively managed ETFs that include other crypto assets like Bitcoin or Solana in an investment strategy.

“This development is a game changer for the crypto industry, making it mainstream and a dedicated investment category within the asset and wealth management industry,” Volery said.

Inbar Preiss is a Regulation Correspondent at DL News. Contact her at inbar@dlnews.com.

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