Europe’s largest trader of Exchange-traded funds (ETFs) Flow Traders NV is opening its doors to the Crypto Market by offering ETNs based on bitcoin and ether. Exchange-traded note (ETN) is a financial product which could be seen as a bond given that is debt issued by a financial institution, but the investor instead of receiving interest payments he/she will obtain the capital gain/loss which is linked to the performance of the underlying index.
The trading firm has been told by regulators that they are seeking to prevent institutions from buying and selling these assets. Nienke Torensma, a spokeswoman of the Netherlands AFM (Authority for Financial Markets) stated:
“We discourage activities in cryptos both by consumers and professional license holders. By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don’t regard it to be an asset class.”
This means that Flow Traders has acknowledged that the opportunity of increasing the liquidity of these assets is tremendous and it appears that the AFM has not realised what individuals truly desire. Indeed, the CO-Chief Executive Office of Flow Traders NV, Dennis Dijkstra pronounced the importance of cryptocurrencies by saying:
“It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested — we know they are because we get requests.”
The Dutch firm is the first company which offers the opportunity to buy and sell ETNs listed on regulated stock exchanges. However, the offering of Exchange-traded Notes based on Bitcoin (BTC) has already been offered for several years by the Swedish XBT provider, which permits investors to invest through their banking mobile application.
How could this affect the market?
Granting the opportunity to investors of investing in cryptocurrencies through a more accessible manner could have a huge impact on the price of these assets. In other words, this action will allow more firms to have the opportunity of buying cryptocurrencies meaning that new institutional capital would be entering the market forcing the price to increase. From a negative viewpoint, it could be the case that as a result of this action from Flow traders NV, Financial Authorities will try to enforce more regulations. This is might not be favourable to the industry creating a pessimistic perspective of the future of these assets, and affecting the price.
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