Flow Traders NV, the Dutch speed trading firm and the first Exchange Traded Fund (ETF) provider in Europe, has taken a step into the crypto market, despite warnings from the Authority for the Financial Markets (AFM).
Bloomberg reported that Flow Traders is offering Exchange Traded Notes (ETNs) based on BTC and ETH. While other companies are providing the same services, none of them have come forward and declared as much publicly. Dennis Dijkstra, the Flow Traders CEO, said:
People underestimate crypto. 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.
However, Dijkstra said that the biggest hurdle faced by crypto companies are the regulators, since it is difficult to convince them. AFM’s spokesperson Nienke Torensma explained that the organization warns license holders as well as other customers to stay away from taking part in crypto activities. “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,” said Torensma.
In order to reduce risk, Flow Traders have found different ways of hedging. They also used future contracts by CME Group Inc. and Chicago Board Options Exchange (CBOE) to hedge crypto ETNs. Although Dijkstra didn’t go into detail, he said that one of the approaches had “big spillover benefits”.
Laurent Kssis, the managing director at Swedish-based crypto ETN company ‘XBT Provider’, said that many institutional clients have become interested in cryptocurrencies, hence more companies are moving into the crypto market. According to Torensma, cryptocurrency regulations need to be finalized worldwide. Since cryptocurrencies are transparent and follow the same standard all over the world, only a “globally regulatory response has a chance to be effective”.
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