Aug 15, 2023

London-based Jacobi Asset Management has listed Europe's first spot bitcoin exchange-traded fund (ETF) on Euronext Amsterdam nearly two years after it was first approved.

Video transcript

London based Jacoby Asset Management has listed Europe's first spot, Bitcoin ETF roughly a year after its planned launch. Joining us now to discuss is Jacoby Asset Management, Ceo Martin Bed. Welcome to the show, Martin. Hello, thanks for having me. Good to have you here. Let's talk. First of all, congratulations. It feels like something to really celebrate when we talk about ITF approvals these days. Um Talk to us about what's been going on in the past year. Why is this finally being listed now? Yeah. So when you are the first to do something, so as you say, it's the first spot Bitcoin ETF to be launched in Europe and it does take some time. Regulatory approval is one step, but there's plenty of other steps uh to, to look at and I think there's a number of factors that is have gone along this journey, the the general macroeconomic environment, the crypto market environment, we all factors that we considered around timing, but the biggest factor has been what we've done with this. Uh This launch is we've added a sustainability element to the fund. And what I mean by that is that um we have uh decarbonise the uh Bitcoin that we hold. So we are ensuring through buying what's called a renewable energy certificate um that the energy usage of the Bitcoin that the fund holds is all procured through uh renewable energy. And so for us that, that's taken a lot of work and working with our partner Zuma to, to implement that and, but it's addressing the environmental concerns around the Bitcoin Network. And so as I said, the Bitcoin, the energy usage of the Bitcoin Network that our fund is responsible for. We've decarbonise that did AAA. And uh was this a requirement to get it passed? I mean, like or is this sort of like to it was this window dressing to make uh regulators happy? No, it was not a regulatory requirement. Certainly it wasn't window dressing. We wanted to ensure that the product that we brought to market was the best product for institutional investors in Europe. And so that's the market we're targeting. And in Europe, I mean, in the U SI think ESG is a bit of a polarizing topic. But in Europe it, it's, it's really got a lot of steam behind it and a lot of support behind it and, and through regulatory changes that have happened and regulatory drivers, institutional investors in Europe are really required to look at the any investments that they make, they have to look at the sustainability, the ESG side of things. And so we've redressed that and So part of the core strategy for uh Jacobi. Uh so it's not Jacoby, it's Jacobi Asset Management um is, is to have the sustainability embedded within all the products that we, that we look at. So any future products we do, we also have the, the, the sustainability elements front and center as we have today. So with this launch, uh what do you expect to happen with the US? Um Do you expect to see us money coming into it? Are there any restrictions uh for us, institutional money at least, or even for uh us uh individuals uh into investing in, in it? And uh do you think that this will give us an indication of what a US based ETF would look like? So unfortunately, there are restrictions for us investors and that it is not allowed to be sold or marketed to, to us investors. Uh We'd love it to be able to but uh that is a restriction uh on, on pretty much all European products going to going into Europe into the US. Um Does it have any impact in the US now? As, as you know, and the whole market knows there's a lot of filings with Spot Bitcoin ETF s in the US? Um They're, they're transparent around the filings. I I don't see any of them addressing the environmental energy issues that uh Bitcoin has um whether some of them will look at our product, see how innovative we've been and look to implement that then, you know, I, I think that would be a fantastic endorsement of what we've been doing and the work we've put in and, and for me it's something that they should be doing. You know, we've done it through the conviction we have. Um, and it's, it's also a big differentiator um in the product, if all these market or if all the spot Bitcoin ETF S come to market at the same time in the US, which is talked about by a number of people that they, they could all get approval at the same time. I think some of them, of those applications will be challenged in terms of getting uh assets in. Um And so they may want to look at a differentiating factor uh that looking at this sustainability element uh would bring to it. Tell me a little bit more about the renewable energy certificates if I'm an institutional investor and I'm uh purchasing one of these spot Bitcoin ETF S. How, how are we ensuring that like this certificate is now helping me meet my ESG goals? OK. Well, the first thing I'll say is that the fund itself is a pure Bitcoin play. So it's pure Bitcoin Beater. We, we hold as an asset of the fund in custody with fidelity uh The Bitcoin 1 to 1 for the value of, of the fund, the renewable energy certificates uh program that we've got is something that Jack of the asset management is managing on behalf of the, of the fund. Uh but it is, is not paid for and doesn't hit the returns of the fund itself where we, we take the costs of that. Um And so how does that, how, how the, the renewable energy market is a tradable market? It's how renewable energy is traded by utilities. So just to give you a bit of an explanation, if you have um a green energy tariff. Uh and your neighbor doesn't, you will get the same electricity from your utility provider. Um But the way that your utility provider um can say that they've provided you with a green energy, a renewable energy tariff is that they will go and buy wrecks, they will go and buy renewable energy certificates. So they're buying the carbon attributes of the renewable energy in the grid. So we're not doing the Bitcoin mining. It's a, it's what's called a scope three emission for the fund. Um And we don't know the miners whether they've used renewable energy, what, what kind of energy they've got. So we make the assumption that there has been none. And we buy these renewable energy certificates, as I said, as your utility company would do to ensure that the energy usage that we're responsible for has been uh procured through renewables. Uh ju just a rough estimate. What's the cost per Bitcoin to, to do that? So the, the cost of the the renewable energy certificate is a separate market. It's not attached to it. So a one renewable energy certificate is one megawatt of hours, um uh one megawatt of electricity. So the cost depends on that market and it depends on the price of Bitcoin and the hash rates, but it works out around 30 to 50 basis points. I would uh you know, currently uh depending on where they, where they are and the investor doesn't see that. You're saying it, they're doing it one for 11 to 1. So we, and he said it, it's coming out of Jacoby's uh uh other like it, it, it, it shows up. I mean, obviously somebody's paying for it. So we, we, the, the fund charges a total expense ratio of 1.5% and out of that 1.5% we pay all the, all the costs of for the fund and we also pay the costs of, of implementing the program about 50 basis points. Yes. Ok. Yeah. So it's a, it's a, you know, it's a great product um for, for the investors. So it's about a third of the expenses currently. Yeah. Ok. Every, as I said, the market rate goes up down. Exactly. All right. And, and we got to ask you, you were at Black Rock for 13 years previously, do you think they have a chance at this ETF application here in the US? Well, with the likes of Blackrock coming into the market and doing a spot Bitcoin um application then that just really gives the crypto the digital asset market such great credibility when, when firms like Blackrock uh come in and make those applications, uh the sec are the ultimate deciders of approval from uh whichever all the applications that are coming in. Um I think we, you know, the more I'm with the market and it'll, it will happen at some point. Uh, when is it, is it, is it, you know, who knows that at the moment? Um But uh it'll be exciting. I've never in all my time of, of launching ETF S, I've never seen so much publicity, so much, so many stories, so much anticipation for product launches and, and, you know, that just says wonders for the, for the future of the crypto market. Martin. Thank you very much for joining the show this morning.

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