08 Nov 2021 · 4 min read

Could ETPs Accelerate the Crypto Adoption?

Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.

When people think of investing in cryptocurrency, almost no one thinks first of going to a bank. Rene Delrieux, a Senior Product Manager of Investing comdirect at Commerzbank in Germany, wants to change that.

Banks are where you open savings accounts, take out home loans, or invest in the stock market. They aren’t where you go to invest in one of the most controversial, disruptive, unregulated, and volatile assets ever to enter the financial marketplace.

But more and more customers have been asking their bankers about opportunities to invest in cryptocurrencies like bitcoin and Ethereum, without the typical risks that consumers face buying cryptocurrency directly.

Crypto buyers have traditionally had to open accounts with unregulated companies. A lost password could lock you out of an e-wallet for good, permanently cutting you off from thousands or even millions of dollars in assets. Delrieux has a better solution.

Delrieux is working with various stakeholders of the German online broker comdirect, to develop an easy solution for the bank’s clients to enter the crypto market.

Online brokerages already deal extensively in Exchange Traded Products (ETPs)—passively managed securities that typically track a specific asset or index. Popular examples include ETFs (Exchange Traded Funds), ETCs (Exchange Traded Commodities), and ETNs (Exchange Traded Notes).

These securities can be bought and sold on exchanges around the world, just like stocks. Delrieux wants to add a Crypto ETPs to the online broker inventory of available products—specifically a Savings Plan offering, which enables customers to invest regularly and long-term, even with small amounts of capital. 

“ETPs are already very common and popular within bank clients,” Delrieux said. “In recent years, asset managers around the world have offered ETPs on single cryptocurrencies or even bundles of various coins.”

“This makes it easy to enter the crypto market through regulated securities, which can be bought and sold via a normal trading account on international stock exchanges.”

Before the advent of Crypto ETPs, aspiring crypto buyers had no other option but to buy and sell crypto coins on cryptocurrency exchanges. These offshore companies often face minimal regulatory compliance burdens. In the event of fraud or theft, coin traders have little recourse. 

A Crypto ETP sold by a bank is completely different. “Banks are heavily regulated,” Delrieux pointed out, “and the securities they sell are also heavily regulated—by the SEC in the US, by BaFin in Germany.”

“The concept of a Crypto ETP is similar,” Delrieux concluded. “Create a retail and regulated investment product that offers exposure to an asset that can’t be sold by retail brokers.”

“Government regulators get involved to make sure banks don’t sell risky products to unsophisticated investors,” Delrieux said. “Considering bitcoin peaked over USD 58,000 in early May, only to fall below USD 35,000 in late May, you can see their point.”

Several Crypto ETPs are already traded on stock exchanges. Theoretically, bank clients already have access to them. But many banks are dubious and apply their own regulations. Some banks just block Crypto ETPs, refusing to add them to savings plans or charging a high commission to make trading them less attractive.

By innovating the online brokers crypto offerings, Delrieux initiated Europe’s largest Crypto ETP Savings Plan. Over 2,9 million customers can now trade and invest in crypto on a monthly basis. The plan charges no fees or commissions, allowing retail buyers to expose more principal right off the bat.

It’s not an easy sell. Delrieux has faced pushback from compliance officers, dubious that Crypto ETP’s will fit client needs and pass regulatory muster.

“I am honestly glad that our compliance team is watching the product launch with a critical eye,” Delrieux said. “Abuse is common in the crypto market, and customers deserve a banking product they can trust.”

Some members of the cryptocurrency community don’t like what he is doing either. To them, the unregulated nature of cryptocurrency is part of the appeal. Inviting government regulators to the party defeats the whole purpose.

But Delrieux, a crypto investor himself since 2017, doesn’t let that phase him. “As a product manager, my focus is on the investment vehicle, not the ideological values of cryptocurrency,” he said. “My goal is to create the safest, most accessible, and most profitable asset possible. I see crypto as an asset like any other, with upsides and downsides, and the potential for both long-term and short-term gains.”

“Cryptocurrency itself will probably remain unregulated for as long as it can, but regulated Crypto ETPs will create new channels of demand. This could not only drive the price higher, but it could also have a stabilizing effect. There could come a time when cryptocurrency has all the qualities that libertarian-minded people love about it, but without the crazy volatility.”

“My customer persona for our Crypto ETP Saving Plan feels the same way. He isn’t a culture warrior or a banner-waver for crypto—he just wants to see returns without unreasonable risk. If a regulated asset fits that bill, he is happy.”

If it catches on, Delrieux will have found a solution for middle-class retail investors to enter a hot, unregulated market, but with the trust factor of a regulated financial instrument. 

Author Info

Paul Greenamyer is a freelance writer in the real estate and finance sector. Born and raised in San Diego, he was once attacked by a surfboard he was trying to ride. He attended Brown University in Providence, RI and now resides in Austin, TX. Paul is also a musician, filmmaker, and the founder of Travel Punks.