Martin Bednall (Jacobi Asset Management): "ETFs will simplify investing in cryptos"

The Big Whale: not many people know Jacobi Asset Management. Perhaps you can start by introducing yourself. Where are you from?

Martin Bednall: we're based in the UK. The whole team comes from traditional finance. We've been interested in crypto-assets for a long time, but two years ago we decided to invest 100% in this universe by creating Jacobi Asset Management, which is a management company dedicated to cryptos.

There are many ways to invest 100% in this universe. Have you chosen to create an ETF? Why such a product?

Because it's surely the simplest product to invest in. Everyone talks about adoption, but it's still very complicated to invest in crypto-assets.

To buy bitcoin or ether, you have to go to exchange platforms or else manage your digital wallets yourself. More than ten years after the creation of bitcoin, it's still far too complicated.

How does an ETF work?

An ETF is an investment product that replicates the performance of a share or a basket of shares. Today, ETFs are used by tens of millions of people on traditional markets. There are ETFs for all types of companies and sectors, and we want to bring the same with cryptocurrencies.

There are several types of ETF. Spot ETFs and futures ETFs. What is the difference?

A "Spot" Bitcoin ETF is based on real bitcoins. For every dollar or euro invested in a Spot Bitcoin ETF, you have the equivalent in bitcoin held in reserve. In this case for our Bitcoin Spot ETF, the American company Fidelity is in charge of custody.

Futures ETFs are more complex products as they do not involve holding bitcoins. The players offering this type of ETF invest in bitcoin futures, but no bitcoin is involved in the transactions.

I think that when Spot ETFs are democratised, no one will want Futures ETFs any more because they are less tangible.

If these products are so interesting, why wasn't there a Bitcoin ETF sooner?

Because it takes time, quite simply. It's complicated to create products based on cryptocurrencies. There are financial and regulatory constraints, and you have to manage to convince the regulators.

What's the main difficulty in launching a product like this?

The main challenge is convincing the regulator and then the context wasn't really simple with the cascade of scandals over the last 18 months (the FTX platform in particular, editor's note).

Speaking of regulators, why did you register your ETF in Guernsey, which is not known for being the most regulated financial centre?

We've had a lot of discussions with European regulators. Some are quite open, others less so...

We obviously wanted to register where we felt discussions were easiest, which is the case in Guernsey (British Crown), which has the added advantage of being a well-known financial hub. There are many investment funds there.

And why is the ETF listed on the Amsterdam Stock Exchange?

Amsterdam is one of the main financial centres in Europe and Guernsey is recognised as an equivalent jurisdiction by the Dutch regulator. This seems fairly consistent to us.

You launched the product a month ago. What are the results?

Several million euros have already been invested in our ETF.

Isn't that a relatively small amount?

We have just launched and we are going to sign partnerships as we go along with distributors such as banks and brokers. We're just getting started.

We're already working on other products. We are considering launching products based on a basket of cryptocurrencies. This could be the top 10 on the market.

You have launched a product that is only available to institutional investors, i.e. banks, funds and insurers... Why not for retail investors?

We would obviously have liked our ETF to be available to retail investors, but at the moment regulation is too restrictive. Regulators are very careful about these issues, especially when it comes to retail investors.

Regulators want to be sure that products are reliable, and that's why they are more flexible about opening up, initially, to institutional investors, but the arrival of Bitcoin Spot ETFs for retail investors is inevitable.

If regulators really want to protect investors, they need to allow crypto ETFs run by established players, otherwise people will continue to go to exchange platforms with little transparency.

Is your ETF available in the EU?

We will progressively register in all regions of the world, in Europe, and beyond, particularly in Asia.

Things are moving in the US, with Grayscale in particular having just obtained an important victory for the development of Bitcoin Spot ETFs. What do you think?

What has happened in recent weeks in the United States is very interesting, because the Americans could become a very big crypto market thanks to the massive arrival of ETFs. This is a major issue.

Today, Europe is well positioned, but the arrival of ETFs, especially Spot, could change a lot of things in the landscape on a global scale.