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Introducing BCHetc: ETC Group Physical Bitcoin Cash

 

Part 1: Introduction to Bitcoin Cash

Part 2: Investment Case for Bitcoin Cash

Part 3: Introducing BCHetc: ETC Group Physical Bitcoin Cash

 

ETC Groups Bitcoin Cash ETC, the BCHetc - ETC Group Physical Bitcoin Cash (BTCH), is an exchange traded cryptocurrency (ETC) that tracks the price of Bitcoin Cash. The ETC is 100% physically backed by Bitcoin Cash and its primary listing is on Deutsche Börse’s electronic trading system XETRA. The product is central counterparty cleared (CCP), providing investors with a transparent, safe, and liquid way to gain exposure to the price of Bitcoin Cash. Each unit of BTCH gives the holder a claim on a predefined amount of Bitcoin Cash.  

 

An Easier Way to Invest in Bitcoin Cash

Investing in BCHetc - ETC Group Physical Bitcoin Cash (BTCH) is as simple as buying shares through your broker or bank.  Unlike investing directly in Bitcoin Cash, there is no need to engage with the technical challenges of setting up a cryptocurrency wallet to store Bitcoin Cash. Your units of BTCH are safely held with your broker or bank, thus removing the risk of losing your investment due to a lack of knowledge of e.g. how cryptographic keys work. 

 

Central Counterparty Cleared on Deutsche Börse XETRA

Clearing through the Deutsche Börse CCP system reduces the counterparty risk market participants are exposed to and provides anonymity. Using a CCP also reduces risks related to late settlement or legal disputes if one party breaches the contract. 

 

Invest in Bitcoin Cash on a Regulated Exchange 

The Bitcoin Cash ETC is traded on XETRA, one of the largest exchanges in Europe. As Deutsche Börse is a regulated exchange, this means that investors can trade with confidence knowing that all market participants are strictly vetted and carefully monitored to prevent market abuse. The alternative is to buy bitcoin cash on cryptocurrency exchanges, many of which are unregulated or do not have as strict security and compliance standards. 

 

Ample Liquidity

The issuer has partnered with world-class liquidity providers and authorised participants (APs) to ensure ample liquidity, resulting in tight spreads on-exchange and the ability to create or redeem units of BTCH on the primary market. ETC Group’s flagship product, the BTCetc - ETC Group Physical Bitcoin (Ticker: BTCE) has strongly benefitted from the solid network of liquidity providers set up by the issuer for its products, making it one of the most liquid products on the Deutsche Börse XETRA exchange throughout 2021[1].  

 

Physical Redemption

Investors have the option to redeem their units of BTCH directly for Bitcoin Cash. As an additional layer of protection for investors, every transaction must be confirmed by the issuer and a reputable third-party administrator to ensure that no Bitcoin Cash can be misappropriated due to misconduct or negligence on behalf of the issuer. 

 

Safe Custody

The issuer stores the Bitcoin Cash backing all units of BTCH in circulation with BitGo Trust Company, a secure, regulated custodian, purpose-built for holding digital assets.  Digital assets are held in so-called Cold Storage, which means that the assets are stored 100% offline. Private keys associated with those assets are generated in offline systems, and the signing process of the transactions is also made in offline systems. The systems used in this type of storage never touch the internet; they are created offline, they are stored offline, and they are offline when signing transactions. [2]

 

Advantages of the BCHetc (BTCH):

  • Bitcoin Cash exposure simplified: exchange-listed, regulated and secure
  • Buying and selling BTCH is as simple as trading any normal share
  • You can trade through your regulated broker, on regulated exchanges with a central clearing mechanism
  • You don’t need to manage a crypto wallet or trade on unregulated crypto exchanges
  • You don’t need to manage cryptographic keys or blockchain technology

 

Risks of Trading BCHetc - ETC Group Physical Bitcoin Cash

  • Cryptocurrencies like Bitcoin Cash can be highly volatile
  • Like equities, an investor’s capital is fully at risk and you may not get back the amount originally invested
  • Exchange rate fluctuations can also have both a positive and negative effect on returns
  • Past performance of a product is no guarantee of future performance
  • The product may not be a suitable investment for all investors and each investor should determine the suitability of its investment in light of their own circumstances
  • For a full, list of risks associated with the BTCH product, please consult the prospectus

 

Bitcoin Cash Trading vs BCHetc - ETC Group Physical Bitcoin Cash 

Here’s how BTCH provides a safer, easier and more familiar experience for investors: 

Feature

Bitcoin Cash trading on a crypto exchange

 

BCHetc (BTCH) on XETRA

Accessibility

Buying Bitcoin Cash may require the investor to set up an account with a so-called ‘cryptocurrency exchange’, which can be a lengthy and time-consuming process.

Such ‘exchanges’ are often unregulated entities and investors face increased risk of money laundering and market manipulation. Money laundering is not really a risk to the investor, market manipulation can be.



BTCH can be purchased on Deutsche Börse (XETRA), one of the largest stock exchanges in Europe in terms of both market capitalization and monthly trading volume. Virtually every broker in the world should have the ability to buy products traded on XETRA for its clients.

Technical and Complex

Setting up a cryptocurrency wallet isn’t easy and preventing theft or loss of value due to other reasons (e.g. losing the keys) even harder. Blockchain wallets are not like credit cards or bank accounts, users of Bitcoin Cash can’t chargeback fraudulent transactions or show up with their ID at the bank desk to recover access – what is lost is usually lost forever.


BTCH keeps Bitcoin Cash backing the product at a reputable, safe, regulated and insured depositary called BitGo Trust Company. Deposits are insured by Lloyds of London against hacking and white-collar crime up to the value of $100 million. BitGo is a regulated trust company and all cryptocurrency is stored air-gapped in cold storage in their vaults.

Liquidity Concerns

Investors interested in purchasing big volumes of Bitcoin Cash face access problems described above multiplied by the number of ‘cryptocurrency exchanges’ they need to connect in order to tap into an acceptably big pool of liquidity.

Secondly, IT systems of many ‘cryptocurrency exchanges’ are technologically inferior to the systems operated by established stock exchanges, and this fact makes top-notch liquidity provision very difficult or even impossible.

Finally, not every professional market-maker is participating on ‘cryptocurrency exchanges. Market-makers face the same technical, access, legal and regulatory challenges and issues alongside with investors. For that reason, some market-makers are willing to provide liquidity only on regulated stock exchanges.


BTCH shares many benefits with traditional ETFs/ETPs – as it is exchange listed and supported by an ecosystem of market makers and Aps, there is guaranteed two-way pricing available throughout the trading day. The product team behind BTCH have contracted multiple professional market-makers to translate fragmented bitcoin cash liquidity into concentrated on-Exchange BTCH liquidity. Through direct connection to the underlying asset via the create /redeem mechanism, BTCH can provide liquidity for both very large and very small trades, levelling the playing field between investors.

Legal Restrictions

Some investors might not be allowed to buy or hold Bitcoin Cash, due to restrictions imposed by the regulator or investment mandate.


BTCH was approved for trading on the regulated market. but there are countries and jurisdictions where BTCH is not available and where regulation may differ. It is advised to check with your broker or bank on these questions.

Regulatory Capital Restrictions

Bitcoin Cash holdings might not qualify to be accepted as part of capital required by the regulator for various reasons.


BTCH is a debt security and is traded on Deutsche Börse (XETRA). It is much easier to qualify holdings of BTCH as regulatory capital than holdings of Bitcoin Cash

Money Laundering Concerns

Bitcoin Cash is a relatively new asset class, and it is difficult (but not impossible) to conduct due diligence and establish sources of funds. It is challenging for investors willing to invest in Bitcoin Cash to establish with the necessary certainty that the Bitcoin Cash they are buying is not proceeds of crime.


Only Bitcoin Cash deriving from regulated sources (Authorised Participants) makes it into custody backing the issued instruments. BTCH is a fully fungible product (which ensures superior liquidity), but investors wishing to create units of BTCH in exchange for Bitcoin Cash(instead of purchasing it on regulated exchange) have either to be a regulated Authorised Participant (“AP”) themselves or have such AP represent them as an agent. APs are licensed and regulated financial intermediaries, and as such are under very strict anti-money-laundering obligations. This means that investors buying BTCH securities can be sure that any Bitcoin Cash they are getting exposure to (and which they can receive should they want to do so due to fungibility of the product) is clean.

Settlement & Post Trade Risk

Parties buying Bitcoin Cash are exposed to counterparty (settlement) and post-trade price risks. Your counterparty can go insolvent after receiving the investor’s part of the settlement (e.g. A ‘cryptocurrency exchange’ going out of business while the investor has cash of bitcoin deposit with it) or it may not honour the favourable price of a trade.


BTCH is a debt security, which is eligible for central counterparty clearing by Eurex Clearing. You can settle trades in BTCH, using the Delivery-versus-Payment mechanism of Clearstream system, which effectively eliminates any counterparty risk. Investors can also use well-established business-processes for securities lending or using BTCH as collateral in order to facilitate, streamline and considerably de-risk any lending operations involving bitcoin.

 

To learn more, please visit our our fund page: Bitcoin Cash ETC

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