Galaxy, DWS join forces to roll out European crypto ETPs

Galaxy Digital Holdings and DWS have formed a strategic alliance to launch new crypto products that will be traded via exchanges in Europe.

The announcement mentioned that the pair will also “explore other digital asset solutions.” DWS will also be Galaxy’s exclusive partner for cryptocurrency exchange-traded products (ETP) in the European market. The new securities will be available via traditional brokerage accounts.

The ETP concept

Steve Kurz, Global Head of Asset Management at Galaxy, emphasized the collaboration with DWS as key to the success of the new product.

The partners’ goal is “to improve our ability to deliver comprehensive solutions to European investors, enabling them to harness the enormous potential and promise of blockchain technology and digital assets in a safe and convenient way,” Kurz said.

ETPs are securities that track the value of an underlying asset, index or financial instrument. ETPs’ values ​​are in theory based on the assets they track, making them a cheaper alternative to mutual funds. But US regulators have warned that values ​​are not necessarily aligned as markets fluctuate.

The new ETPs from Galaxy and DWS will be based on digital assets such as Bitcoin, Ethereum and NFTs. Allows investors to track a number of assets in one security.

Why it’s important

New ETPs for digital assets entail major risks. Still, they appeal to some investors for several reasons. First, they allow diversification of portfolios by providing exposure to a wide range of assets. Including cryptocurrencies, stocks, bonds and commodities.

Second, ETPs are readily available to both retail and institutional investors when trading on exchanges. This means that investors can invest in various assets without the need for direct ownership or management of complex trading platforms.

In addition, ETPs have high liquidity, leading to tighter bid-asp spreads and lower transaction costs. They also tend to have lower fees and operating costs, resulting in savings for investors. Finally, ETPs are transparent and disclose their holdings daily, which can help investors make informed decisions about their investments.

For all the perceived benefits, the risks are real. The Commodity Futures Trading Commission (CTFC) has issued a warning about ETPs. It cautions that they do not necessarily behave like traditional exchange-traded funds or mutual funds that invest in stocks, bonds or other asset classes. The CFTC points to potentially serious differences between the value of the commodity pool’s shares, and the values ​​to which the underlying asset(s) may rise or fall.

The CTFC warns traders not to have unwarranted hopes about the long-term profitability of ETPs.