FINMA approves Switzerland’s first retail Bitcoin ETF

Switzerland’s financial regulator FINMA approved the country’s first retail fund investing directly in Bitcoin on 20 October, opening a new route for investors to gain Bitcoin exposure through a Swiss investment fund. The approval covers a fund under Swiss law, classified as an “other fund for alternative investments” with a specific risk, FINMA said in its announcement of the approval.

The fund holds Bitcoin directly, rather than using futures or other derivatives. Investors buy fund units through a brokerage account; the fund’s value is tied to its Bitcoin holdings. BIT Asset Management later identified the approved product as its Bitcoin Fund ETF, ticker BBIT. The Block reported the identification and expected November listing on the SIX Swiss Exchange.

What does the fund hold, and how is it structured?

BBIT is a Swiss collective investment scheme that invests directly in Bitcoin, according to its manager. That structure matters because existing Swiss Bitcoin exchange-traded products are debt securities, while this product is an investment fund under Swiss law. The Block reported that BBIT’s assets will be held separately from those of the management company.

The distinction is legal as well as practical: an exchange-traded product is a debt instrument, while a fund holds assets for investors under fund rules. The approval gives retail investors access to direct Bitcoin exposure through the fund structure. Trading was expected to begin on SIX in November; FINMA’s announcement did not name the fund or give a listing date.

Why did FINMA allow a fund concentrated in Bitcoin?

FINMA granted an exemption from the applicable risk-diversification rules because Bitcoin has a longer trading history and higher trading volume than other cryptocurrencies, the regulator said. Diversification rules normally limit how much a fund can concentrate in one asset. Here, the approved fund can focus on Bitcoin alone.

The decision follows FINMA’s 2021 authorization of a crypto fund for qualified investors, which invested mainly in a basket of cryptocurrencies. The new approval is the regulator’s first for an exchange-traded fund investing directly in Bitcoin and open to retail investors. FINMA said other providers have also submitted or announced Bitcoin ETF applications.

What safeguards apply, and what risks remain?

Supervised institutions must take steps to reduce operational and custody risks, and the fund documents must clearly explain the risks. FINMA also says financial-services conduct rules apply when the fund is sold, including clear warnings about volatility and potential losses and checks on suitability.

Those controls do not reduce Bitcoin’s market volatility. FINMA warned that investors could lose a significant amount of their capital, including through an approved ETF. The fund makes Bitcoin exposure available through a regulated fund structure; it does not make the underlying asset less risky.

Sources

• announcement of the approval — finma.ch
• reported the identification and expected November listing — theblock.co