Interested in investing in Ethereum ETFs but not sure where to start? This article will guide you through the best Ethereum ETF alternatives, how they work, the best crypto exchanges, and other options available to investors in the UK and Europe. Let’s dive in!
Can I Invest in Ethereum ETFs from Europe and the UK?
Due to regulatory barriers, investing directly in Ethereum ETFs isn’t an option for those in Europe and the UK. The European Securities and Markets Authority (ESMA) and the Financial Conduct Authority (FCA) in the UK enforce strict rules that prevent the creation of ETFs focused solely on a single asset like Ethereum.
These regulations, particularly the UCITS guidelines in Europe, require that ETFs be diversified across multiple assets to spread risk and protect investors. Since a single-asset fund like an Ethereum ETF doesn’t meet these criteria, it’s not available in these regions.
However, this doesn’t mean you can’t gain exposure to Ethereum at all. Investors can explore alternatives such as Ethereum ETNs (Exchange-Traded Notes) or even consider purchasing Ethereum directly through a trusted exchange.
Best Ethereum ETF alternatives in Europe & the UK
1. Ethereum ETNs & ETPs
While Ethereum ETFs aren’t available, European and UK investors can still access Ethereum ETNs (Exchange-Traded Notes) and ETPs (Exchange-Traded Products). These financial products allow you to invest in Ethereum’s performance without directly holding the cryptocurrency.
How do ETNs work?
When you invest in an ETN, you’re purchasing a debt security issued by a financial institution that tracks the value of an asset like Ethereum. Each note represents an obligation from the issuer, backed by the underlying asset, ensuring the ETN closely follows the asset’s price.
While ETNs offer this convenience, you’ll have less direct control over the asset, so choosing issuers with a strong reputation and robust security measures is essential.
Although ETNs charge an annual fee, these costs are often comparable to the expenses you’d incur managing a personal crypto wallet. Despite the potential for minor tracking discrepancies, ETNs remain a liquid and accessible method for you to invest in cryptocurrencies.
ETNs vs. ETFs: Key differences
Although both ETNs and ETFs provide asset exposure, there are key differences:
- Structure: ETFs hold a basket of assets; ETNs are structured as debt securities, not equity.
- Diversification: ETFs spread risk across multiple assets; ETNs can focus solely on Ethereum.
- Collateral: ETNs are often backed by physical Ethereum; ETFs are backed by the assets within the fund.
- Credit Risk: ETNs carry the issuer’s credit risk, unlike ETFs, which are directly tied to the underlying assets.
You can find more detailed information about the differences between ETFs and ETNs on the Investopedia website.
Best Ethereum ETNs/ETPs to invest in from Europe (Ordered by AUM)
1) 21Shares Ethereum Staking ETP (AETH)
- ISIN: CH0454664027
- Trading Currency: EUR
- AUM: + $400M
- Annual Fee (TER): 1.49%
- Key Features:
– Provides direct exposure to Ethereum with the added benefit of earning staking rewards;
– Fully collateralized and backed by physical Ethereum stored in cold storage;
– Easy to trade on traditional exchanges with the security of physical backing;
– Structured as a fully collateralized product with clear regulatory oversight.
2) CoinShares Physical Staked Ethereum (ETHE)
- ISIN: GB00BLD4ZM24
- Trading Currency: EUR
- AUM: + $235M
- Annual Fee (TER): 0.00%
- Key Features:
– Offers exposure to staked Ethereum, allowing investors to benefit from staking rewards;
– Physically backed by Ethereum with 100% collateralization;
– No management fees, making it a cost-effective option for Ethereum exposure.
3) VanEck Ethereum ETN (VETH)
- ISIN: DE000A3GPSP7
- Trading Currency: EUR
- AUM: + $130M
- Annual Fee (TER): 1.00%
- Key Features:
– Provides direct exposure to the price of Ethereum;
– Physically backed by Ethereum, it is held in cold storage with a transparent and regulated structure;
– Competitive fee structure for long-term investors.
4) ETC Group Physical Ethereum (ZETH)
- ISIN: DE000A3GMKD7
- Trading Currency: EUR
- AUM: + $95M
- Annual Fee (TER): 1.49%
- Key Features:
– Physically backed by Ethereum, stored in secure, regulated custody;
– Designed to offer pure exposure to Ethereum’s price movements.
Best Ethereum ETNs/ETPs to invest in from the UK (Ordered by AUM)
1) 21Shares Ethereum Staking ETP (AETH)
- ISIN: CH0454664027
- Trading Currency: EUR
- AUM: + $400M
- Annual Fee (TER): 1.49%
- Key Features:
– Offers exposure to Ethereum with the added benefit of earning staking rewards;
– Fully backed by physical Ethereum, with assets stored securely in cold storage;
– Suitable for investors interested in both price appreciation and staking returns.
2) WisdomTree Physical Ethereum (WETP)
- ISIN: GB00BJYDH394
- Trading Currency: GBP
- AUM: + $105 M
- Annual Fee (TER): 0.35%
- Key Features:
– Offers secure and physically backed exposure to Ethereum.
– Ethereum is held in regulated and insured cold storage, providing peace of mind for investors.
– Part of WisdomTree’s broader suite of digital asset ETPs, known for reliability and security.
3) 21Shares Ethereum Core ETP (ETHC)
- ISIN: CH1209763130
- Trading Currency: GBP
- AUM: + $19 M
- Annual Fee (TER): 0.21%
- Key Features:
– Provides cost-effective exposure to Ethereum;
– Fully collateralized with Ethereum, stored in institutional-grade cold storage;
– Ideal for long-term investors seeking to minimize costs while gaining exposure to Ethereum.
2. Buying Ethereum directly
Purchasing cryptocurrency through a reputable exchange is your best option if you prefer to own Ethereum directly rather than investing in ETNs or ETPs. Direct ownership gives you complete control over the asset, but it also requires you to manage its security and storage.
You can store your Ethereum in hot wallets, which are always connected to the internet for easier access. For enhanced security, you might opt for cold wallets, which store your private keys offline, making them less vulnerable to online threats. By choosing a reliable platform, you ensure both the accessibility and security of your investment.
Best brokers/exchanges to buy Ethereum from Europe & the UK
1. eToro
51% of retail CFD accounts lose money.
2. Coinbase
3. Crypto.com
4. Uphold
Will I be able to invest in Ethereum ETFs soon?
No. Ethereum ETFs do not exist in Europe/the UK due to UCITS diversification rules. However, discussions are ongoing about including crypto in UCITS funds. The ESMA is assessing this, which could eventually lead to crypto ETFs, but this process will take time.
Additionally, the new MiCA regulation is under review, which could significantly impact future crypto investment decisions.
For more detailed information, you can view the consultation paper directly from ESMA’s official website here.
Bottom line
In summary, while the current regulatory landscape in Europe and the UK does not permit the creation of Ethereum ETFs, there are still viable alternatives for investors who want to gain exposure to Ethereum. The most straightforward options include investing in Ethereum ETNs or ETPs, which provide a regulated and secure way to participate in the cryptocurrency’s performance.
For those seeking low fees and direct exposure, 21Shares Ethereum Core ETP could be an excellent choice. If you’re interested in potential staking rewards, 21Shares Ethereum Staking ETP and CoinShares Physical Staked Ethereum ETP provide an attractive opportunity.
However, if you prefer to own Ethereum directly and are prepared to manage its security and storage, purchasing Ethereum through a trusted exchange like eToro, Coinbase, Crypto.com, or Uphold provides full control over your asset, with varying levels of fees and security to suit your needs.
Remember, investing in cryptocurrencies carries significant risk due to market volatility and the absence of traditional investor protections. Always align your investment decisions with your financial goals and risk tolerance.
If you have any questions or need further guidance, feel free to reach out!
