“Institutional investors need to take a closer look at digital assets”

Stefan Lenherr
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Making bitcoin tradable on the stock exchange: even for an industry giant like US asset manager VanEck, it was an unexpectedly protracted project – that ultimately ended with great results, with the VanEck Vectors Bitcoin ETN now successfully listed on Deutsche Börse.

Since the launch of VanEck Vectors Bitcoin ETN at the end of November 2020, people have been constantly asking Dominik Poiger for information: How and where can my customer buy the product? What exactly is meant by the term “cold storage”? “It’s a huge opportunity to engage with our customers about an innovative product”, says VanEck’s product manager, “and the response since launch has been overwhelming.”

Poiger and his cryptocurrency-savvy colleagues have been working towards this moment for more than three years: “We’ve long been trying to set up an ETF based on bitcoin in the United States.” However, VanEck’s original plan failed due to the regulator’s hesitant stance on bitcoin. “For many regulators, bitcoin continues to be a controversial asset”, says Poiger. “But the oldest cryptocurrency has long since established itself and is poised to become digital gold.”

Poiger finds a receptive partner

Poiger found the perfect ally to implement the plan to make bitcoin easily accessible to European investors in Gabor Gurbacs, Director of Digital Assets Strategy at VanEck. In 2017, Gurbacs, a well-known personality in the area of cryptocurrencies, spent an extended period of time at the VanEck office in Frankfurt, where Poiger is based. “When we were in the process of drafting the legal documents, the question of whom we would hire as custodian for our bitcoin came up.”

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Dominik Poiger, Product Manager at VanEck in Frankfurt: “After regulators made it clear to us not to allow any Bitcoin-based product, we looked around for countries that were more open in this respect.”

It’s a small world, as you know: a colleague of Poiger’s at the time had connections to Liechtenstein. He knew and got him in touch with Raphael Haldner, who works as Head of Fund and Capital Markets at Bank Frick. After an initial inquiry was sent off to Liechtenstein, Haldner entrusted Julian Gretzinger with the matter. The team leader of Capital Markets at Bank Frick recalls: “We of course saw it as a real honour to have an industry giant like VanEck come knocking at our door.”

Liechtenstein Blockchain Act as a basis

Dominik Poiger learned that there are also financial market regulators who definitely have an open ear for innovations in the area of crypto. “After other regulators made it clear to us that they would not be approving a bitcoin-based product, we looked around for countries that were more open to the project”, says Poiger. He tried in Switzerland, for example: “However, the regulatory environment in Switzerland is autonomous – so the product would not have been available throughout Europe.” The choice was ultimately made in favour of EEA country Liechtenstein. It not only guaranteed market access to Europe due to its location but was also one of the first countries in the world to create the basis for classifying bitcoin in a legally sound manner thanks to its Blockchain Act, which was passed at the beginning of 2020.

Put through its paces

The project gained momentum in the summer of 2020, when VanEck began due diligence on Bank Frick. “We were put through our paces by the risk management staff at the VanEck headquarters in the USA”, says Gretzinger. The auditors left no detail unnoticed, wanted to know exactly how the deposited bitcoins are kept in custody, how IT security would respond to specific scenarios and how the core banking system is structured. The auditors ultimately greenlighted the project.

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Julian Gretzinger, Teamleader Capital Markets at Bank Frick, was the central point of contact for VanEck for the development of the Vectors Bitcoin ETN.

The head office giving permission to proceed was also because the bitcoins are held in custody at a regulated full-service bank in Europe. This is a security argument that can be used to score points, especially among discerning investors.

From physical to digital gold

Ultimately, VanEck has a reputation to defend. In 1955, founder and namesake John van Eck laid the foundation for a company that today manages around 65 billion dollars by launching one of the first international equity funds on the stock exchange. Van Eck was also the mastermind behind the first gold equity fund in the United States, which he established in 1968.

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VanEck is the first major asset manager to list a Bitcoin-based product.

Over the past 50 years, the company had regularly attracted attention with innovative fund solutions. “It therefore fits the mould that we are the first well-known asset manager to launch a bitcoin-based product on the stock exchange”, says Dominik Poiger. The entrepreneurial spirit of the asset manager, led in the second generation by Jan van Eck, allows employees to actively deal with topics that other industry leaders shy away from.

Julian Gretzinger also appreciates the advantages of a family-run company: “Compared to other banks, family-run Bank Frick is extremely agile and really geared towards providing maximum benefit to the client.” Tailor-made products like the bitcoin ETN from VanEck could not be planned on a drawing board. “When unforeseen problems arise, we solve them as quickly as possible. We have a very client-centric approach.”

“Growing together on the project”

Gretzinger’s counterpart at VanEck is full of praise for the cooperation with Bank Frick: “I have never experienced such personal support and attention before. As quickly as my e-mail inquiries were answered, I sometimes had the feeling that Julian was looking after us exclusively”, Poiger says with a laugh. “I believe that both of our companies have grown during this project: Bank Frick has learned what requirements asset managers like us want to see fulfilled. We have learned how we need to position ourselves to succeed in the extremely dynamic environment of digital assets and how people with Bank Frick’s expertise can help us do that.”

“We don’t chase after short-term trends”

After the successful launch of the Bitcoin ETN, it is clear to Poiger that other similar products will follow in future. “As a company, we are not set up to chase after short-term trends.” On the contrary, the importance of bitcoin and other digital assets will increase greatly. “That means that institutional investors like us also need to take a much closer look at them.” However, the current project first needs to be brought to conclusion, because one important detail is still missing: “Due to the coronavirus pandemic, we have not yet been able to celebrate the launch of our ETN together – but we’ll manage to squeeze that in at some point!”

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Stefan Lenherr
Stefan Lenherr is a journalist, copywriter and consultant. His primary topics include the economy and the digital transformation. Lenherr resides in Liechtenstein.