Introducing BCHetc: ETC Group Physical Bitcoin Cash

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.