US-based asset manager VanEck has launched a Bitcoin exchange-traded note (ETN) on the Deutsche Xetra marketplace.
The asset manager previously tried to get an ETN in the US, but authorities didn’t approve, citing the lack of surveillance agreements and the risk of market manipulation. The U.S. regulatory board refused to approve Vaneck’s application because of improper surveillance agreements among exchanges.
According to the press release by VanEck, with the new VanEck ETN, investors can be exposed to Bitcoin without necessarily buying it themselves.
The company also says the ETN product is physically backed by Bitcoin, and it mirrors Bitcoin’s performance.
Allowing users to gain from Bitcoin’s performance
Head of VanEck Europe Martijn Rozemuller stated that Bitcoin offers a great way to diversify a portfolio because of its low correlation to other assets.
“Bitcoin’s low correlation to other asset classes makes it an excellent way to contribute to the diversification of a portfolio,” he revealed.
Martjin also stated that the Bitcoin ETN provides a product that enables investors to gain considerably from Bitcoin’s performance. Vanick will be partnering with Frick, a crypto custodian bank. Based on the announcement about the partnership, the custodian will be keeping the Bitcoin linked to the ETN.
According to a tweet yesterday from Gabor Gurbacs, the firm’s digital asset strategist, the product is not really an ETF, but an exchange-traded note. It is also listed on the Deutsche Borse Xetra, and not on the U.S. exchange.
1) Today @vaneck_eu launched a #Bitcoin #ETN. The ETN is physically-backed by Bitcoin and listed on Deutsche Böerse Xetra. Launching a Bitcoin ETP was a top priority for VanEck. We succeeded! VanEck hopes to serve many in Europe and Asia! Resource page: https://t.co/oRpVOQyby2 pic.twitter.com/xnCnTWqMrG
— Gabor Gurbacs (@gaborgurbacs) November 25, 2020
An ETN is not necessarily a mutual fund, but a debt instrument that tracks sometimes the difficult-to-access market, which in this case is Bitcoin.
As an ETN that’s completely backed by physical Bitcoin, the VanEck Vectors Bitcoin provides investors complete market exposure in the trusted format of other products listed on the regulated exchange. Dominik Poiger, who is the product manager, pointed out that the Bitcoin ETN is fully collateralized. It means that the funds invested in the product can also be used to buy Bitcoin, which connects each ETN to a certain amount of Bitcoin.
Once the user deposits the funds, the Bitcoin equivalent will be held in cold storage by crypto custodian bank Frick.
It seems VanEck is finally getting all the approval it needs to stand firm in the industry, although its activities are limited in the U.S. because of the company’s business disapproval by the Securities and Exchange Commission.