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Eurex begins trading Europe’s first Bitcoin futures contracts

Photo of: Joseph Stone
by Joseph Stone

Eurex, for European Exchange, is the world’s second-largest futures exchange by number of contracts traded (nearly 1.3 billion contracts on an annual basis as of mid-2005) just behind the world’s number one CME Group.

Europe’s largest derivatives exchange Eurex announced in an Aug. 23 statement that it will list the first Bitcoin ETN futures contracts on Sept. 13, 2021. This first European Bitcoin futures product is an initiative of ETC Group, the cryptocurrency-backed asset provider. It is based on ETC Group’s BTCetc (BTCE) which is backed by real bitcoins, 100%.

This will give European institutional investors access to a regulated product to gain exposure to the king of cryptocurrencies. This allows investors to access future contracts based on BTCetc Physical Bitcoin (BTCE) from ETC Group, the world’s leading exchange. product. The ETC Group, which started in June 2020, is now one of the largest cryptos traded ETPs in the world, in which several companies are involved.

The new futures contract will be traded in euros and physically delivered in BTCE which is 100% backed by Bitcoin, and any investor can easily redeem the underlying Bitcoin.

“This decision will allow more market participants to trade and hedge Bitcoin, with this new future being treated the same as any other derivative contract in terms of central clearing, netting, and risk management,” said Randolf Roth, a member of the Eurex board.

As a point of clarification, just like ETFs (exchange-traded funds), ETNs (exchange-traded notes) replicate the performance of a stock index. But unlike ETFs, ETNs are not funds, but debt securities, similar to bonds. ETNs are issued by banks that commit to paying the return of an index at a predefined maturity.

The regulatory climate for products that provide indirect exposure to Bitcoin would therefore be milder in Europe than in the US. As filings for the launch of a Bitcoin ETF pile up on the desks of the U.S. SEC, the Commission continues to play it safe and does not seem to be in a hurry to rule on these applications.

SEC Chairman Gary Gensler’s commencement speech in early August 2021, which hinted at an opening for Bitcoin ETFs based exclusively on Chicago Mercantile Exchange (CME) BTC futures contracts, has not been followed by any concrete action as of yet.