Brazil: Crypto-ETFs to make debut soon, but is clarity really there

Latin America’s largest asset manager Itaú Asset Management has partnered with Galaxy Digital to offer crypto exchange-traded funds (ETFs) in Brazil.

Its first offering, the IT Now Bloomberg Galaxy Bitcoin ETF (BITI11), has begun to offer investors exposure to Bitcoin (BTC). It will offer other diversified ETFs later. The announcement was shared through a press release

Founded in 1957, Itaú Asset Management has been operating for over 60 years and is the largest private asset manager in Latin America. It has approximately $165 billion in AUM.

Regulatory ambiguity regarding Crypto-ETFs

Cryptocurrency ETFs are a novel asset class across the world and largely remain undefined due to regulatory ambiguity. Due to low ownership costs and diversified fund exposure, crypto-ETFs have become popular among investors. It was in October 2021 that the first cryptocurrency ETF – ProShares Bitcoin Strategy ETF – began trading.

Instead of actual cryptocurrency prices, an ETF’s share price reflects derivative price movements. As a result, the price of a share in a given cryptocurrency ETF rises in tandem with the price of Futures contracts. Currently, there is no clarity on the ambit of any regulatory body on crypto-ETFs.

Brazil is Latin America’s leading country in crypto-adoption

As per the Chainalysis 2022 Global Crypto Adoption Index

In October 2022, Finder.com ranked the country 8^th in terms of crypto-adoption. As per its findings, 29.8 million Brazilians own cryptocurrencies, with 31% of them owning Bitcoin. The crypto-ownership rate in Brazil is 18%, which is higher than the global average of 14%.

As the saga around the FTX crisis unfolds, Galaxy Digital has disclosed its exposure to FTX. Galaxy recently released the results of the third quarter of 2022. it revealed that it is exposed to $76.8 million worth of assets to FTX, of which $47.5 million is currently in the withdrawal process. It also reported a net loss of $68.1 million for the period, compared to a $517.9 million profit during the same period last year.