Iconic, a German financial technology startup with offices in Frankfurt, is preparing to file an application to operate a Bitcoin instrument that would be traded in two major European exchanges. The instrument in question would be an exchange-traded note that would feature Bitcoin as the underlying asset. Frankfurt and Luxembourg would be the two exchange platforms where this ETN would be listed if approved, but the issuance of an international securities number would make it available to investors outside of these jurisdictions.
The main partner of Iconic in this ETN venture would be Coinbase, the popular cryptocurrency exchange platform bawed in the United States. The managers of this ETN intend to take money from investors, which would likely be euros, and use them to purchase Bitcoin, thus making BTC/EUR the referent currency pair. It should be noted that ETNs are somewhat similar to exchange-traded funds (ETFs), but the latter is more likely to track an index or more than one security. ETNs are more basic instruments in the sense that investors trust in the ability of managers to keep the underlying assets as liquid as possible. American investors are not usually interested in ETNs, but they tend to like trading ETFs.
Approval of the Iconic BTC ETN would set an important precedent for financial technology firms pursuing ETF approval. Regulators at the U.S. Securities and Exchange Commission are still not convinced that cryptocurrency ETFs are a good fit on Wall Street; however, this has not applied to BTC futures contracts on the Chicago Mercantile Exchange. The parent company of the New York Stock Exchange launched the Bakkt derivative instrument in late September, but investors have yet to warm up to this new trading product.
Bringing institutional investors aboard the cryptocurrency markets is at the heart of each and every effort to get an ETN, ETF, or derivative instrument approved. Should Iconic prove to be successful in Frankfurt and Luxembourg, the next step could very well be filing an application before the British Financial Conduct Authority. Getting digital currency instruments listed on the London Stock Exchange would be a step in the right direction in terms of giving hope to American companies trying to list Bitcoin ETFs on Wall Street.