Wiener Börse, one of the largest Central Europe-based stock exchanges, today listed its first cryptocurrency product. While this appears like a strong adoption signal, these exchange-traded products (ETPs) might also be the latest event in a growing trend that ultimately devalues cryptocurrency, regional experts say.
Issued by Swiss-based fintech firm 21 Shares AG, this single-asset product, which will trade under the ticker symbol ABTC, seeks to track both the investment results of Bitcoin, the world’s largest cryptocurrency by market capitalization, and its second-place contender, Ethereum.
In other words, Wiener Börse clients will now be able to get exposure to cryptocurrency from a regulated trading platform, without having to directly buy the cryptocurrency on their own.
“We are happy to share that Bitcoin is now accessible everywhere for both retail as well as institutional investors across the entire DACH region [of Germany, Austria, and Switzerland],” said Hany Rashwan, CEO of 21Shares AG, in a press release.
Although listing on the Vienna-based stock exchange is a milestone, it is not 21 Shares’ first crypto- or even Bitcoin-focused ETP. At the beginning of July, its Bitcoin ETP was listed on Deutsche Börse’s Xertra trading platform. And in 2018, the company launched its first cryptocurrency ETP basket (HODL) composed of 48.6 percent Bitcoin, 30.89 percent Ethereum, 12.54 percent Ripple, 3.01 percent Bitcoin Cash, and 2.95 percent Litecoin as of September.
This event is the latest sign of a growing trend by fintech companies to give mainstream investors more regulated access to cryptocurrency. In turn, it also signals further acceptance of cryptocurrency by both institutions and regulators.
While positive for adoption, there is also concern that onboarding new investors into cryptocurrency through ETPs misses the point of cryptocurrency.
Highlighting both points is Anita Posch, host of the Bitcoin & Co. Podcast and a board member of Bitcoin Austria, a regional nonprofit organization that has provided Bitcoin education since 2011.
Though Posch celebrates how far Bitcoin has come in Austria, she is also quick to point out the drawbacks of more people getting into cryptocurrency through these types of investment products.
Over a Twitter exchange with a 21 Shares research associate, she stated that she prefers that people hold their own keys when buying Bitcoin instead of purchasing it via a third party. Maintaining one’s private keys to Bitcoin addresses is considered an essential security and ownership measure by most Bitcoin experts and enthusiasts.
In an interview with Decrypt, Posch also pointed to the fact that the global exchange Coinbase will secure the ETP’s underlying Bitcoin.
“Basically it’s a security product to own non-custodial (Coinbase) bitcoin,” said Posch. “That means you now have three intermediaries, although the basic idea of Bitcoin is to empower the individual and eliminate intermediaries and all those financial constructs that led to the banking crisis in 2008.”
Posch’s point is that the creation of ETPs could eventually lead cryptocurrency into the same traditional finance mismanagement that Bitcoin was purportedly created to prevent.
Additionally, she said, ETPs enable a dangerous reality that cryptocurrency exchanges like Coinbase can “[grow] so big that they can influence the direction of Bitcoin development.”
What’s more, Posch stated any exchange securing an ETP that does not frequently prove its reserve supply of funds could risk insolvency through rehypothecation, a practice where a bank or broker uses the funds given to them as collateral by their clients for their own investing purposes. This was a common practice in the United States until the 2007 collapse of Lehman Brothers, which subsequently contributed to the 2008 financial crisis—and, indirectly, the birth of Bitcoin.
Although opening a more regulated path for the less experienced might seem like an obvious windfall, at least in the short term, crypto purists might be shaking their heads.