Jean-Marie Mognetti, CEO of Coinshares: “Nobody is making money with Bitcoin ETFs in the United States”

Jean-Marie Mognetti, CEO of Coinshares: “Nobody is making money with Bitcoin ETFs in the United States”

Coinshares specializes in the marketing of regulated financial products indexed to cryptocurrencies and has nearly $5 billion in assets under management. An amount that could increase even further if the Jersey-based company completes the acquisition of the American asset management company Valkyrie. An operation that is on schedule after the option on this takeover was exercised last January. This purchase would make the company listed on the Stockholm Stock Exchange to market the famous Discover Bitcoin ETF on American soil. A strategic positioning like Coinshares has just achieved the second best year in its history with a turnover of $ 108.5 million in 2023 (100.2 million euros). Interview with CEO Jean-Marie Mognetti.

Jean-Marie Mognetti: We explain it simply by the management principles we have put in place and by the structure of our company. It was not funded by equity funds or venture capitalists. It is a company that was founded completely independently with money that was not distributed to shareholders as dividends. It has been a continuous reinvestment, with a very important logic of control and return on investment. The strategy is simple: we make a profit that we reinvest. There is a very clear difference between taking advantage of a hype effect or the desire to create a real company. From the beginning, we have sought to maximize our investments with the perspective of maximizing the value of our shareholders.

You’re talking about Coinshares’ overall strategy here, but what about this fiscal year 2023 specifically?

The results known in 2023 are the consequences of several years of work that will be reflected in 2023. If we look at Coinshares since 2015, we are making more and more money every year with periods of acceleration during cycle peaks, in 2017 and in 2021. the year 2022 is an anomaly, a annus horribilis (due to the bankruptcy of FTX And CelsiusEditor’s Note).

You have exercised the option to acquire US financial products issuer Valkyrie* at a crucial time since the SEC authorized the marketing of Bitcoin ETFs in cash. Can you tell us more about this approach?

First of all, it’s not final yet. We have certainly exercised our option, but there is still a lot of work to be done before the final version can be completed. We’re going to knock on wood until the deal is signed. But you say it, we come at the right time. From the beginning, we had a very clear vision that the US market was a market that could cost us a lot, a lot of money, even if we didn’t have that much money to spend. This forced us to think about the most optimal way to enter this American market, and wait for the best opportunities. If we had had a lot of money from investors, we might have asked fewer questions, but we would undoubtedly have made mistakes. Then in 2017, 2018 everyone was filling out S-1s (SEC Form for Marketing Financial Products, Editor’s Note) without the slightest outlet, apart from very salty avocado notes, we preferred to wait. In reality, we had no added value over the competition, not Blackrock’s distribution network. What would we have done there? We wanted to present something different. We started cautiously in this market with the launch of our hedge fund. Then Valkyrie presented itself for the first time early last year, where we made an offer that was rejected. They came back to us in September and the fruit was ripe. It was something we had been working on for a long time, that was seen as a potential opportunity and that made sense within the group.

“Coinshares has very strong knowledge of the mining activity”

If this is final, how do you want to differentiate yourself in this highly competitive market?

The idea was not just to come up with a Bitcoin spot ETF: we have been doing this in Europe since 2015, we know very well how to do it and we suspected that the American market would standardize this ETF. We knew that with such franchises in this market there would be very stiff price competition. The reality is that today no one is going to make money with the Bitcoin ETF in the United States, everyone is losing money. Even if we do that, we’ll break even at best. On the other hand, we will be able to make money by creating niche products, complementary products that allow people to get allocation beyond Bitcoin, such as an ETF that specializes in miners. We have a very strong knowledge and understanding of the mining activity and it works very well. There is demand and we have capacity to expand this product line. The advantage is that it gives us two platforms: one to market traditional products and another to experiment more than we do in Europe. This is a really interesting opportunity for Coinshares’ international growth.

Is there a plan B in case the takeover fails?

No, there is no plan B in Valkyrie: if it doesn’t happen, we don’t do the US. It’s very easy. If there was a plan B, that would mean we’re not sure about Valkyrie. We are 100% confident that Valkyrie is confident it will be completed successfully. We are convinced that Valkyrie is the right opportunity to move forward. We do not trade in different horses. There is only one. Then there are very few opportunities on the market. There are very, very few players, so the opportunities are very, very limited and it is one of the last ones we can take advantage of, especially with the price of Bitcoin having risen and the launch of ETFs in the United States. Values ​​have exploded. Valkyrie may be the latest addition that Coinshares can make at affordable prices.

Is this US market the main growth driver for Coinshares today?

It is not alone, but the United States is a real source of growth. The American ETF market is ten times larger than the European market. 50% of global assets under management are in the United States. So I won’t be surprised if within three years, when we complete this acquisition, we have more assets under management and revenue in the United States than in Europe. We have a brand that is very, very good. Recognition. A high-quality research department, so we have things to bring to the US market. I think we can come in with our heads held high, not just like the small European company.

“The United States is Struggling to Regulate the Crypto Sector”

What is your view on the current regulatory landscape in the United States?

Things are moving slowly and it’s a big election year in the United States, but things are moving in the right direction: I think as the outstandings in the United States increase, so will regulation. Overall, blockchain poses major challenges for regulators, if only to identify all the problems. So it will take some time, but I think the US market is moving forward. And the difference between the American market and the European market is that it moves forward with one man. Once the legislator has decided, the application is much more standard than in Europe. If the European Parliament decides on a certain point, enforcement is delegated to the local legislature and then to the local supervisors. When we recover Mica (European regulations on the crypto asset market, editor’s note), there is no budget in Europe so they will implement it differently depending on whether you are in Germany or France. There are still many open questions that may indicate that the United States has not yet said its last word.

Do you think we are already at the tipping point where Americans can regain their leadership in the crypto sector?

That’s exactly what I’m saying. The United States has made a huge pirouette in mining, a sector where it was completely behind. There was no more mining in the United States. Everything except Canada had gone to China and overnight they took over all the mining operations in Texas. I have the feeling that the same thing is happening with regulation: the Americans are going to battle to achieve regulation. The sector will have to do it. However, the United States has a much faster implementation capacity than the European Union with MiCA. I doubt MiCA in its current form is enough, although it is a very good start.

You are now well identified in Europe, but the transaction volumes there are much lower than what we see in the United States. Have you investigated the issue on this continent or do you still see room for progress?

No, no, there is certainly room for improvement in Europe. There are many markets that are not even open today. The institutional market in Europe hasn’t even started touching cryptos yet. This will probably happen with the entry into force of MiCA. This market is not mature at all; we must be halfway to what can be done. There is still a lot to do in terms of penetration.

What is the interest of institutional investors in these crypto products in Europe?

There is a huge amount of work to be done in Europe. Institutional investors were almost ready to make the move in 2020, just before the FTX, but this affair was the final straw after Luna. This made the entire planet doubt this ecosystem: the largest investors in the world financed this man (Sam Bankman-Fried, co-founder of FTX) and it was fraud. This created distrust. We have to wait a little longer until the cleaning is finished before we can make any decisions. The European institutional is much more traditional than the American institutional. It will first move into the United States before moving into Europe. You will see insurance companies in the United States taking significant positions in cryptos before you see them in Europe.

In Europe, you launched an Ethereum ETP that allows you to benefit from staking dividends. Do you believe in a similar product in the United States?

It will be more difficult because there is a very specific view of Ethereum, especially because of what the SEC considers to be a financial security. I think they’ll do a spot ETF to start. So it won’t be a very competitive product. I don’t think it can be as successful as a Bitcoin ETF.

*Since this interview, on Tuesday, March 12, Coinshares announced the repurchase of Valkyrie.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *