Frequently Asked Questions: Global X 21Shares Bitcoin ETF & Global X 21Shares Ethereum ETF

With the rising popularity of cryptocurrency ETFs both globally and here in Australia, we have put together some frequently asked questions about investing into the Global X 21Shares Bitcoin ETF & Global X 21Shares Ethereum ETF.

 1. Are EBTC and EETH ‘Spot’ ETFs?

Yes, EBTC and EETH are spot ETFs. Units in EBTC and EETH represent an absolute entitlement to a specific amount of Bitcoin and Ethereum, respectively, held directly by Global X Management (AUS) Limited in a separate trust for each investor.

The ETFs do not use any futures contract or other types of derivatives or any offshore funds or other vehicles to help it gain exposure to the price of the underlying cryptocurrency.

EBTC and EETH have a proven 2-year track record of reliable operation, covering some periods of extreme volatility and have performed exactly in-line with its investment objective at all times without incident.

2. What are the advantages of accessing Bitcoin and Ethereum via a stock exchange?

There are some distinct advantages of using physically backed ETFs via a stock exchange to access cryptocurrencies.

• Efficient and Highly Regulated: Physically backed cryptocurrency ETFs are bought and sold on a stock exchange – such as Cboe – like any other ETF. They allow investors to gain exposure to these digital assets in a highly regulated, secure environment.
• Secure Access: Cold storage is where the private keys used to access and transact in cryptocurrency are stored offline entirely without internet access. It is often thought to be more secure than a Bitcoin wallet as there is no access route for hackers. Hence, ETFs like EBTC and EETH offer efficient access to bitcoin and Ethereum respectively, in a single trade without having to worry about losing the private key to a crypto wallet.

3. Who is the custodian for EBTC and EETH and how is the cryptocurrency stored?

The cryptocurrency is held on behalf of investors in EBTC and EETH by Global X at Coinbase Custody Trust Company, the world’s largest crypto asset custodian. All Bitcoin and Ethereum are held in institutional-grade offline “cold storge” accounts that are housed in specialist high-security facilities and subject to strict process controls.

Coinbase is a Nasdaq listed company and is regulated by the New York Department of Financial Services as well as being a fiduciary under New York Banking Law. Coinbase Custody Trust Company maintains SOC 1 Type II and SOC 2 Type II compliant audits.

4. How are EBTC and EETH structured?

EBTC and EETH provide direct exposure to Bitcoin and Ethereum by virtue of that fact that it gives investors an absolute entitlement to Bitcoin and Ethereum held in custody by Global X as trustee. The value of units in EBTC and EETH directly references the spot price of the cryptocurrency and investors have a right to redeem their EBTC and EETH units directly for Bitcoin and Ethereum. The ETFs employ a two-tier trust structure whereby the ETF invests in a sub-fund that holds the underlying bitcoin. Both the fund and the sub-fund are absolute entitlement trusts, controlled by Global X and work together to convey direct ownership of the underlying cryptocurrency to unitholders in the ETFs. The rights and protections of unitholders in EBTC and EETH and any equivalent single-tier trust structure are identical and do not impact the daily operations of the ETF. There are multiple ways to achieve the same investment objective, and when comparing products potential investors should be more concerned with the quality, scale and experience of the product issuer and their key service providers.

5. Can investors directly access the underlying cryptocurrency held by EBTC and EETH?

Yes. Because unitholders in EBTC and EETH have an absolute entitlement to the cryptocurrency held in custody, each unitholder has a right to redeem their ETF units directly with Global X and take delivery of the prescribed amount of Bitcoin or Ethereum to their nominated wallet.

Since coming to market in 2022 several investors have taken advantage of this feature in both ETFs and have received Bitcoin and Ethereum to their chosen location in lieu of their ETF units.

6. Who is 21Shares and how are they involved in EBTC and EETH?

21Shares is the issuer of the world’s first physically-back crypto ETP and today offers the largest range of cryptocurrency exchange traded products globally.

As a valued partner in EBTC and EETH, 21Shares bring their vast crypto-native experience to bear by offering Australian investors access to the benefits of their market-leading technology, operational efficiency and deep knowledge across the entire crypto ecosystem.

7. How are EBTC and EETH valued on a daily basis?

EBTC and EETH are valued daily by reference to the CryptoCompare Coin Comparison Aggregate Index (CCIX), which is a real-time index that aggregates Bitcoin and Ethereum trading data, respectively, from over 300 exchanges and calculates a volume-weighted average price that is a widely used as a reliable valuation point for cryptocurrencies. CCIX is fully compliant with the IOSCO (International Organisation for Securities Commission) Principles for Financial Benchmarks.

8. What is Global X’s commitment to cryptocurrency innovation?

Global X is committed to the long-term opportunity that Bitcoin and other crypto assets provide to investors as part of a diversified portfolio. Cryptocurrency investing is central to our approach to providing investors with unique and unexplored solutions.

9. When comparing cryptocurrency ETFs, what should I consider?

When evaluating the relative merits of an ETF, investors should look beyond marketing materials to understand not only the structure, investment process and costs of the fund, but also the experience, scale, track-record and financial backing of the product issuer and its range of critical service providers.