Regulated Crypto Investment Products: Accessing Digital Asset Exposure Within Traditional Portfolios

Transcript

I think with that I'm handing over to the next panel. I read out already the title. On stage we'll have Olga Corwell from the Crypto Valley Association. Thank you very much for moderating this panel. We'll have Ronald Rich from Bitwise Asset Management. Carlos Martin Donsil from Swiss Quote Bank. Last but definitely not least, Robbie Young and I brands are great partners. Please put your hands together for the panel. >> Thank you, Benex. Thank you. Uh good afternoon everyone and thank you for joining us for this panel on regulated crypto assets. Uh let's quickly start with a short round of introductions. So we have a fantastic uh lineup of

speakers today and yeah I'll let you introduce yourself. >> Okay, thank you. I'm Ron Dster representing Bitwise on the sales side French speaking regions in Switzerland. I'm Carlos Martin and lead digital asset at Swiss Code Bank. Um Robbie Jung and I oversee the investing side of Animoka Brands. >> Thank you. So let's dive in. Uh following the approval of um the US uh sport ETF on January 2024, institutional access to digital assets accelerated significantly. And according to Bloomberg on October 2025, global crypto ETP assets under management

reached 237 billion indicating market maturity and increased adoption. Um maybe Ronald maybe you could comment beyond the US developments what um the recent regulatory I don't know developments or uh changes and how are they influencing the way how crypto uh projects and products being uh shaped and uh structured and brought to the market and is it even opening us some opportunities for creativity.

>> Yes, thank you. Um, so definitely uh the opening up of the market and the push from the SEC in in January 2024. If we come back to that uh was a huge kind of drive momentum driver in the in the industry and since then we have had uh also developments on the regulator side in the US. You have the genius act for stable coins that have has been passed right now. you have the clarity act who is trying to be pushed through uh but they're working on it and it looks like the the willingness is there to to make it happen. So that that's also very good news. It will put a framework uh for the entire crypto industry in the US. We have the same in Europe that is already

in place its mika. Um and then we can see on a local basis, country by country the local regulator, the domestic regulators opening up one by one uh access and they're starting now with the traditional ways to invest. So crypto ATPs is is one uh channel that has been been opening up in the UK. Crypto ATPs are now um open to retail investors. You have the same in France. Uh crypto EPS have been included in the distribution rules for retail investors. So uh this is all very positive and more recently I think even more positive is that the uh

Luxembourg regulator uh is now allowing managers of USIT funds to allocate up to 10% uh of their assets of their usage funds into indirectly into crypto. also using for for instance funds or crypto ETPs. So all of this is obviously going slow but it's going in the right directions. We have now a framework that is being built that allows institutional players to come and do this properly which is great. So we can do this soon at scale. Um being more so to get to your to your question about being more creative and opening up the market to to things that are uh more sophisticated.

This will happen slowly but it is happening. People are now obviously looking also into staking strategies. Uh and this is one step and then we'll next step where there are defy strategies. There are things happening now. We have we have just become um uh creator on more for vaults and this is creating also some demand. So more and more people and and and we are seeing institutional and corporates are interested in in in more uh maybe custom strategies or or sophisticated strategies. So it's it's happening the ATP and the normal way is just a gateway drug and now we are building on that and the demand needs to grow too. Markets need to help also markets right now are not really helpful to kind of large

scale development but that's where we are. >> Thank you. And as we all know, Switzerland was the pioneer pioneering country in DT approval DT act and regulatory from regulatory perspective was always very open to innovation and also Swiss quote was one of the first mover and the first IMC on Bitcoin was launched in 2017. Carlos could you comment like since then uh what happened with the trend? What about the demand or what about also new product offering? Is it demand driven or it's is there any influence of all these changes in global regulatory approach

and openness um to this sector? >> So for us it was a bit different than other banks because we started offering spot crypto and AMC's oriented or thematically exposed to crypto more or less at the same time. Back in the day, flows were very easily spotted. So we can see most if not every single retail that wanted access to crypto went through the spot option while we saw a marginal and more increasingly uh exposure from corporates. Although this mix if you sum up the AUM of the AMC's and the AU on the crypto side were clearly dominated by the crypto let's say the spot product retail driven. Uh then we've seen uh the market you know evolved. uh we saw AMC's getting let's

say substituted to some extent by ETPs although we can consider AMC's inside the ETP section but let's say from ANC's to ETFs we saw this this switch uh but then AMC's started to gather let's say the more exotic strategies either following the more exotic indexes or going let's say to non-index strategies which if you think about the corporate demand for them was a bit mild but we started to see you know a growing interest of retails in these let's say exotic products that the EMCs that are a bit now specialized into it for the ETPs uh and this was a surprise to me personally uh especially when the US ETPs were announced ETFs for the matter um we saw an influx of retail funds

actually which was not marginal was maybe at peaks 5 to 10% of daily volumes uh now they are pretty well stabilized a bit below 5% but for the corporates though we saw a great switch and we saw on new typologies of corporates entering the crypto exposure business let's say so it was an affirmation of saying ETPs are the final form of single asset uh einbased products for crypto the ones that didn't dare to touch spot now we're touching the ETFs and now what comes next uh I think it will depend on the market as uh Ronald said uh we are seeing a bit more of exotism appearing uh in the side of the AM in the of the AM's asset managers For us, uh, clients

are demanding a little bit of everything in the end. Depending on the market sentiment, they go back to spots, simple strategies, get exposure to Bitcoin, to Ethereum and all of these single spot. Let's go for staking. Let's do also maybe a bit more of self-custody going into vaults, DeFi, and so on, which I think asset managers naturally move there being now curators. Uh, but for the institutionals now, it's I think catching up. So, ETFs were monoasset. That period now has ended in my opinion. Now they're getting the exposure they wanted. Now they want the interest of the staked Ethereum and they want it liquid and they want baskets and they want index. And why AMC's are still dominating because there's not yet very mature indexes or crypto baskets which I

think is the next you know six months trend coming and then it will continue I think this way. There will be never in my opinion there will always be a use case for rappers or ein based products versus the cryptospot but at some point each one of them will be used very specifically for for a purpose. >> Thank you. And in terms of volatility, uh we always think that institutional adoption would and actually through the use also of structured products would help to decrease the volatility which despite all these recent developments and significant um uh uh raising adoption through ETP. Um volatility seems to be still the case

while I'm talking about Bitcoin. How do you comment on this? or at least maybe for this last year. Is it like the last year was a little bit different for any assets or um all else reasons? What there is no volatility to your >> so for me Bitcoin was let's say a non-micro asset pre 2017 became more and more macro asset post 17 especially post 21. You can see correlation, you can see different measures of volatility but also correlation between different indexes uh and becoming let's say a risk asset uh inside the investor general

investor mind uh to be proven yet uh I think overall intraday volatility is more stable based on the less data very difficult to analyze because you need to keep into account the complex macro environment we live on today which is also you know for Bitcoin maxes and people defend defending Bitcoin as the new gold wait a bit like and Bitcoin needs to prove it's a safe heaven type of asset uh which I don't think it's impossible but I think it has to prove it >> if also you look at Bitcoin's volatility just historically uh obviously at its launch it was looking like a an Amazon stock at its launch kind of 25 years ago and it was volatility was over 100 200

and now historically if you look at It's it has gone down and uh uh bitcoin is on a yearly basis around the same as a as a meta the stock meta stock an invidia or a Tesla. So it's becoming way more acceptable for people to actually hold it now and you have less that excuse now that volatility is is a factor. I think on the other hand volatility is also positive. it needs to be perceived as a positive because if you have an asset that has zero volatility then it's getting boring and what people want out of this is our returns and also the behavior of uh uh the diversification effect that that a bitcoin can for instance give in a in a portfolio. So

that's that's why institutions are looking at this and as you said Carlos it's a risky asset it's a volatile asset but it offers asymmetric uh returns and it's a it's an asymmetric bet that is interesting for a lot and if you put one or two% then uh you don't suffer too much if it loses half half of its value. >> Yeah I I think also it's it's helpful to think about these things sort of in three buckets at least that's how I look at it. So um I think you have kind of uh let's call it dig bluechip digital assets. So your bitcoins and ethereums and maybe some L1s or other infrastructure tokens you know it's a very small basket of top five tokens let's call it. Um I have a bit wise ETF

of one of those I think in my own. Um and then you have alts or loosely everything else you know in sort of digital native assets and then you have the RWA bucket which is basically things that are financial instruments from elsewhere but have become tokenized as a result. And so we kind of look at those three buckets and I think that last RWA bucket actually is going to be where a lot of the excitement is over this this calendar year. um just because obviously I think that's coming handinhand with the increased in institutional adoption.

Um I think at the same time there's been a steady uptake especially we see this in Asia of the um very top tier tokens let's call it top five top 10 tokens which are generally in the portfolios of most institutional and family office fund managers. Um, and then obviously because, you know, we have our background in in retail and consumer, we would love to see a resurgent of so-called alts, but I I think we're going to have to hold off for that one a little bit. >> I was just wanted to add a comment. I like that you said this because uh for retails, I think this cycle this cycle tomathic which is all about infrastructure is essentially reserved for private markets. So, it has split a

bit the market into two. Retails were the first getting exposure to to the token, but now token economics is switching to securities and I think that's a huge challenge retails are confronting and that's why we're lacking a bit their their impulse in my opinion. >> Yeah, definitely. Although I think one of the things that really gives me like uh hope for retail just as a as a a market to get access to digital assets actually were comments from a um a fund manager uh well fund manager she she owns a fund fund business, very large global funds business. Um, and and I think the thing that struck me was she said, "Look, you know, our historical business basically the the economics of our business require that I need to

charge a customer a minimum of $500 in order to take their business. Otherwise, I lose money. It doesn't make any sense for me." But actually my new digital asset products which are tokenized, I can actually offer that to a client for $5 and I can still make a a margin. So I can afford to open up these assets to a much broader audience now just because my costs have come down and and I think that's actually it's very unsexy but very exciting. >> And this is a nice trans transition transition to my next question to you Robbie. uh how do regulated crypto investment products compare to direct participation in investment in in tokens ecosystem talking about like from the

perspective of capturing the whole value of uh web 3. So I think it's it's just a matter of it's a matter of what we've been talking about volatility and risk appetite, right? So institutional risk appetite is always going to be different. Um you know family office risk appetite may be different from institutional and and so on down to individual consumers. I think as a web 3 native firm, we've always been interested in kind of the direct participation side of things just because that really accesses what we think are the most exciting feature of tokenization which are the network effects of participating directly in the network. Um but that having been said, I think actually it's the regulated products that are going to uh give the

most oxygen to the industry in general because obviously the more capital inflow, the more builders we can attract to the space, the more opportunity and products and and you know the bigger the ecosystem gets and I think here it's also important to assess the difference between let's say west and non-west countries and accessibility because crypto was sold or marketed as an accessibility play for everyone to be able to self-custody, invest and so on. Uh but the reality is different. You know in the west investments are generally used through intermediaries, brokers, banks like us.

Uh while in the non-western countries usually it's less formal and crypto let's say opened up this investment space. So I think that distinction is also important in order to say okay there's there's an influx or not there's animosity or not and then the you know collaboration aspect of the communities and token participants. So yeah I think it's it's key. >> Um let's talk a little bit about product innovation side uh gold and silver recently um seen renewed interest from investors.

Is here there is anything that we could offer or for clients maybe let's say ETP uh with the tokens backed by silver or gold or some other interesting structures like this do you see any potential risks opportunities maybe what about performance and does it even make any sense to to think about these kind of products Yeah, we were discussing together now, right? Uh before this for me, so you need to avoid layering products, right?

So why issue a single asset ETF for Pax Gold for example? For me, intuitively doesn't make too much sense. But then an asset manager using Pax Gold instead of physical gold for whatever reason, operational efficiency, liquidity, which is not the case, but maybe 247 markets that are open in one side and not the other. Then there's interesting approaches. You know, in general, I will philosophically say why put layers on top of layers because everyone needs to get a fair share. So, if you put three layers, it has to be more expensive than one. But it really depends. I think it brings more uh optionality, you know, and this is key especially on the asset management side, but also on the distribution side.

>> Optionality in what case? >> Sorry. >> In which sense? Optionality. So I can offer through the distribution a better cheaper product that can be priced more often and it's not you know a fund that is updated every week or is based only on futures or synthetics I can say no no no this is physical uh and then it's even redeemable at some point so even if the fund goes asset manager goes bankrupt which generally doesn't happen and then on top of this you can be delivered in kind this pack gold and then you can redeem it's nice but also you need to be careful careful because those layerings add more complexity, more cost, also more counterparty risk.

Now I'm not depending on the gold of the London metal exchange enmy. I think it's the physical one. Now I'm depending on Paxos which at the same time depends on the LE. So those things needs to be assessed. Uh but they can represent operational efficiency for example. >> Yeah, there is there is demand. I need to make a disclaimer here because obviously we have a product already in existence and we are not the only ones. There are more and more of these products. So we have a product that um allocates dynamically between gold and um and bitcoin. Uh the demand there what is where did it come from? It was people were interested or for those institutions who are viewing we were mentioning gold obviously as a safe

haven and bitcoin is trying to get that role of as a safe haven. It's not a safe haven yet but maybe one day will be adopted as such. it's at least looking like it has the same characteristic as as the hardest money around. So that that's that's positive. So for those who were kind of not so not too keen to be fully exposed to to Bitcoin, the idea was to mix the two together and to have a system at the back for us. It's quantitatively driven. You have a model behind that reallocates on a monthly basis between the two and uh right now uh most of of it is is allocated to to gold. Obviously uh but that's a way >> physical gold

>> physical so the product is invested in the Paxos token which is backed by gold so it's not a direct exposure to gold we are not holding gold physically but we're holding the token in in obviously in custody in gold storage which gives access to gold at at the end but yeah you have an indirect some people who want really just to put a toe in the water and uh test the temperature with what what it's like to hold Bitcoin, this is a good way to do it. So these are the kind of ways we we can uh where we can create products that are bit more sophistic kind of tiny b bit more sophisticated not just purely um uh passive fully passive and then we will

probably get to the next levels after that. But uh I think that as we were mentioning before the demand right now is purely it's it's most of it is passive and and uh we're slowly building on the active side but it's taking time. >> I was going to add maybe another success story more from the consumer side uh of RWAS um but I think it it speaks to the model of tokenization actually that's represented by by the gold and precious metals discussion um but it's a little bit more amusing perhaps um is a company called Courtyard. Uh we're not an investor. Um but Courtyard um basically does one thing which is they produce RWAs based on vaulting physical assets.

Uh and they vault one kind of physical asset which are Pokemon cards. Um and so you send them your physical Pokemon card to their bonded warehouse in Miami which is fully insured and they issue you an NFT a tokenized version of it against your Pokemon card. And what they've done is they have consolidated the global liquidity of Pokemon cards because now if you're a collector and a trader in Singapore, you can safely trade through a trusted intermediary because it's an NFT on the blockchain with a Swiss trader or a American collector or what have you. Um, but the punch line is uh they do between 20 and $40 million a month in trading. Um, and they only have

one asset class and one that probably most of you fund managers in the room have overlooked, which is Pokemon cards. Um, but I do think it's a great example, albeit a little bit amusing, of how you can use this technology at such a small price point in terms of the cost of deploying the technology to take an overlooked asset class and make it financially viable through global liquidity. I was about to ask about just like scaling this model as bit wise uh does with with gold to I don't know to copper or oil but definitely not Pokemon cards.

So but anyway how how do how do you feel is it possible to is there is any potential for commodities to be there ATP >> look for us it's we as bit wise are fully um focused on crypto so uh integrating other asset classes uh need there needs to be needs to make sense one there needs to be demand >> yeah I still mean tokenized >> yeah so if it's tokenized Obviously it will make a lot of sense. It it's will be demand driven. We are looking at every product that we launch from a does it make sense? Is there demand bit? Can we back it properly? Just launching a product and trying to throw kind of

throw stuff against the wall and see what sticks. We try to avoid that. So it really needs to make sense and and again uh at this point we haven't encountered from our clients demand on that front but it's totally possible. We are going this way. If everything is going to be tokenized then then it's open open range. >> No, I agree. I mean it's in the end is offer and demand. Uh going into an institutional ETP based product has an overhead cost which is huge has some set of rules that are restrictive especially for exotic assets. I think tokenizing first, trying out, seeing how it works, and then tapping global markets through ETPs. I think it's it's a good, let's

say, playbook for for different exotic asset classes. I saw it with art, with wines, with watches, you know, everyone was talking about watches. Of course, we're in Switzerland, so everyone was talking about watch collectors. Then you see it takes up uh online blockchain power technology, whatever you want. no fraud surprisingly for uh let's say alpha testing but then the market crashed 50 60% on collectibles of course there's not transitions toward and and second blockchain liquidity is very different from traditional markets liquidity uh and it can be really challenging when the assets are on one side or the other you can see it already with Bitcoin like you can just check Bitcoin at key times

on market openings becomes crazy on the spot ah but it's a 247 7 247 market yes but the stock exchange is not 24/7 so the Jane streets the state streets all of these guys hedging recovering working with asset managers for for everything related to operations uh I mean they will go into these times of of ours so yeah I think it's a challenge if you connect commodities which are non 247 not always very physical because they have this parallel between physical and non-physical and you put everything on chain it can be a bit of a clown show if If you ask me, especially at the beginning, I remember when barrels of oil were negative, right? They were they went to minus 32. And I always remember this guy from Bloomberg that did the

effort of holding the contract until uh getting the delivery. He actually was going to receive a barrel of oil. You go on chain and that token ends up in the hands of whoever. And again, I said liquidity on chain is very different from trade fine. and it ends up to been delivering in I don't know another country you know the brokers and and traders need to to ship it there I mean it becomes very difficult so it will it will be a transition first of all with more synthetic approaches and then more and more physical >> thank you and just few closing uh remarks and closing question by default uh on crypto was kind of invented to give access to crypto

exposure to let's say traditional investors right who do not want to deal with wallets with I don't know custody security issues etc how do you uh feel like in five years imagine that um the adoption will be growing people will be more aware with the and more familiar with the technology do we still need would we still need um to have this instrument like ETP IMC uh keeping in mind the cost of management and uh everything or what would be the future what would be the potential I can say in five years for structured products in general >> it's tough to say how fast the adoption will will happen and within five years

it can be very quick and three years everything has changed and you have everything tokenized uh but until then I think you still have enough different profiles of investors out there and the ETP for the time being has a still reset uh because it's practical, it's liquid, it's some it's a traditional investment that is like an ETF or is it an ETF or an ETP or it's like a stock uh from a um how do you say a reporting perspective you have everything in one account it's very easy to deal with you don't have to pull or have a special software to pull everything together under the same roof so uh yeah I think for some people uh

the easy way will still be used and then if there is an easier way down the line in a cheaper way then that will be used and we'll move on uh and that's the the progression that you have to take uh but from from in five years we'll see I think we'll still it still be useful and I said probably down the line more active you will see active stuff happening >> but would it be more product on basket or like single assets >> can it be still on bitcoin >> you you still see now the demand for baskets is growing we see in the US. We have also transformed our our funds, our private funds that we had already on baskets into ETFs. The demand is there.

It's not broad, but it's it's it's starting. So, further down the line, it will be those kind of products definitely, not only single assets. >> Yeah, I think they will stay. Uh, and why I say this is if we talk about gold, for example, legally speaking, you can go to a lot of types of shops to acquire physical gold. You can go to your local bank to acquire gold and put it on a safe. You can acquire gold through a brokerage platform like us in different shapes and colors. You can acquire gold in a tokenized form. What is the share of each of these asset classes? I think will depend on more external factors and market dynamics. When markets financial markets are in a turmoil, people will go

more into physical or closer to physical and less financial. when the market is stable, they will go towards more financial because they can leverage this and do more stuff and then less physical. So I think it's a matter of cycles and offer and demand. I think there's space for all these asset classes. What I'm more hesitant is to say tokenized and non-tokenized versions of things. It will depend on how tokenization enters and stays in the market. And for that we don't anyone here can have its opinion but no one knows the truth, right? the future in the case.

>> I guess I would say I think um if we're looking out as far as five years, I think then um if your assets are not tokenized, then you're going to miss out on the majority of fund managers who will be agentic by then. >> Interesting. Okay, thank you. I think we're about to to finish. We are run out of time. Thank you all for joining us and thank you for your fantastic contribution. Thank you. Thank you.