What is a crypto ETP?
Exchange-traded products (ETPs) are a family of securities that track the value of one or more underlying assets. Like company shares, ETPs are listed and traded on regulated stock exchanges, settle through the same infrastructure as any other security, and sit in an investor's normal brokerage account alongside equities, bonds and traditional ETFs.
Crypto ETPs apply that same structure to digital assets. Rather than opening an account on a crypto exchange or managing a self-custodied wallet, an investor buys a listed security that provides economic exposure to the price of Bitcoin, Ethereum or another cryptoasset. Responsibility for sourcing, securing and custodying the underlying coins sits with the ETP issuer, under terms set out in a regulator-approved prospectus.
Crypto ETPs are regulated financial instruments under MiFID II, distributed under the EU Prospectus Regulation[1].
In practice, this gives a crypto ETP investor protections that a direct crypto holding may not have by default: a mandatory prospectus, ongoing disclosure obligations, best-execution rules on the stock exchanges where it is listed and trades, and supervision by a national competent authority (BaFin in Germany, the AMF in France, Consob in Italy, the CNMV in Spain, or the FCA in the UK). This does not extend to the underlying cryptoassets themselves, which remain outside deposit or investor-compensation schemes - that risk is disclosed and regulated at the wrapper level, not eliminated.
Bitwise, for example, issues its European range under an EU base prospectus approved by BaFin, and - since the FCA approved a UK base prospectus for the issuer in January 2026 - also issues some products for listing on the London Stock Exchange's Main Market under that separate UK approval. Bitwise’s product range listed on EU exchanges includes physically backed ETPs on Bitcoin, Ethereum, Solana, XRP, Hyperliquid, Canton and more, as well as diversified digital-asset baskets.
What is a crypto ETN or ETC?
ETP is the umbrella term that generally covers all exchange-listed, commodity- or crypto-tracking securities - ETFs, ETNs and ETCs alike. ETN and ETC are the structures most commonly used for crypto exposure in Europe. The difference between the terms comes down to one factor: physical backing.
ETN (exchange-traded note): traditionally an unsecured debt security that tracks the value of an underlying asset or index. In its purest form, an ETN does not hold the underlying asset at all - the investor is exposed to the issuer's ability to pay, similar to a bank credit note.
ETC (exchange-traded commodity/currency or cryptocurrency): a debt instrument, like an ETN, but backed by direct ownership of the underlying asset - physical gold for a gold ETC, or Bitcoin held in cold storage for a crypto ETC.
The distinction matters for risk. An unbacked ETN carries direct exposure to the issuer's creditworthiness; a backed ETC/ETN instead holds the underlying asset in segregated custody, which is a materially different risk profile even though both trade under similar-looking tickers on the same exchanges.
In practice, most European exchanges list these fully collateralised, backed products under the ETN category rather than a separate ETC segment, so the label on an exchange screen will often read "ETN" even when the product is structured and collateralised like an ETC. This is explained in more detail in the section "How the European ETP taxonomy fits together," below.
Bitwise's European crypto ETPs follow the fully-backed ETC model: each crypto ETP is physically backed, holding the coin or basket of coins itself in cold-storage custody rather than a synthetic or derivative claim on it.
What is a crypto ETF?
In traditional markets, an ETF mirrors the price of a basket of securities - an index such as the DAX or the Nasdaq - so investors gain diversified exposure in a single trade.
The label "ETF" is used loosely across jurisdictions and does not always describe the same legal structure. In the United States, spot Bitcoin and Ethereum products that are listed on regulated stock exchanges such as Nasdaq or the New York Stock Exchange are structured as ETFs ('33 Act grantor trusts). In Europe, the equivalent exposure is typically structured as an ETN/ETC instead of a UCITS fund - a distinction covered in more detail in the next two sections. Both routes offer exchange-traded, price-tracking exposure, but the legal wrapper, custody arrangement and regulatory regime may differ.
This has a practical consequence: a European-issued crypto ETP is not registered under the US Securities Act of 1933 and cannot be offered to US investors, and the reverse also holds - US-listed spot crypto ETFs are generally not distributed to retail investors in the EU or UK.
The term "crypto ETF" in practice is used in Europe to refer to a UCITS-compliant, blockchain-themed equity fund. Rather than holding cryptoassets directly, these funds hold a basket of listed equities in companies exposed to the crypto industry, for example publicly traded crypto exchanges such as Coinbase, Bitcoin mining companies, or other blockchain-adjacent businesses. That gives investors an indirect way to gain exposure to the growth of the crypto sector through the equity market, rather than a direct claim on the price of Bitcoin or Ethereum.
How the European ETP taxonomy fits together
The European ETP market developed product type by product type, and that history explains much of the terminology confusion investors encounter today.
- 2000: ETFs are introduced in Europe as UCITS-compliant funds - pooled, diversified vehicles structured as funds rather than debt securities.
- 2004: ETCs (exchange-traded commodities) are introduced, giving investors exposure to a single physical commodity, such as gold, fully backed by the underlying asset.
- Later: ETNs (exchange-traded notes) are added for more complex or derivative-based exposures, typically structured as unsecured debt securities.
Crypto ETPs arrived more recently, and because crypto tokens do not fit the UCITS fund structure that European ETFs use, most European crypto ETPs are listed under the ETN category on exchanges such as Deutsche Börse Xetra. The important nuance is that, even though they sit in the ETN listing category, a fully collateralised crypto ETP is functionally an ETC: 100% backed by the physical asset, not unsecured debt. Market participants sometimes describe this as a "backed ETN," and it is this structure - not a synthetic UCITS ETF - that underpins most regulated crypto exposure available to European investors today.
Bitwise's crypto ETPs, for example, are often listed under the ETN category for this reason, while being fully collateralised and structured like ETCs in substance.
Crypto ETP vs. investing in crypto directly
Both routes provide exposure to the same underlying asset price. What differs is the wrapper: a regulated security held in a brokerage account, versus a self-custodied or exchange-held crypto position outside the traditional financial system. The table below summarises the main practical differences for a European investor as of the date of publication.
| Crypto ETP | Direct investment | |
|---|---|---|
| Portfolio integration | Integrates with shares/ETFs in an existing account Crypto ETPs are held in a standard brokerage account and appear on the same portfolio statement as equities, bonds, and ETFs. This enables consolidated performance reporting, a single tax document, and unified risk management - without the need for a separate crypto account. |
Separate from traditional investments Direct crypto holdings exist outside the traditional financial system and cannot be held in a standard brokerage account. Investors must track positions across separate wallets and exchanges, with no standardised annual statement for tax purposes. |
| Capital gains tax | Taxed as financial instrument income - rate depends on respective country and jurisdiction ETPs are classified as regulated financial instruments and taxed within the standard capital gains regime of each EU member state. In most jurisdictions the effective rate may be lower than for direct crypto, which is frequently treated as miscellaneous or speculative income. Loss offset against other financial instrument gains is generally available. |
Often taxed as miscellaneous income - rate depends on country/jurisdiction Direct crypto investments are typically treated outside the standard financial instrument tax framework. Gains may be taxed at a higher rate, losses cannot generally be offset against financial instrument gains, and all reporting obligations fall on the investor. |
| Regulation | Regulated financial instrument (MiFID II) Crypto ETPs are transferable securities admitted to trading on regulated markets. They are subject to prospectus requirements, ongoing disclosure, and supervision by the national competent authority (e.g. BaFin, AMF, Consob, CNMV). Issuers must comply with MiFID II transparency and conduct-of-business rules. |
Not a regulated financial instrument Direct cryptocurrency holdings are not classified as financial instruments under EU law. There is no prospectus requirement, no mandatory disclosure, and no equivalent investor protection framework. MiCA provides some operator-level oversight, but individual asset holdings carry no MiFID II protections. |
| Trading venue | Regulated exchange (e.g. XETRA, Euronext, Nasdaq) Crypto ETPs are listed and traded on major regulated exchanges including XETRA, Euronext Paris, Euronext Amsterdam, and Borsa Italiana. Investors benefit from transparent order books, best-execution obligations, and continuous market surveillance. |
Crypto exchange - varying standards Direct crypto is bought and sold on crypto exchanges operating under varying regulatory regimes. There is no universal best-execution obligation, no mandatory pre-trade transparency, and standards of market surveillance differ significantly between platforms. |
| Custody | Cold-storage custody ETP units sit in a regulated brokerage or custody account. The underlying crypto is held by a regulated third-party custodian, segregated from the issuer's own assets. In most EU countries, securities held by a regulated broker may be covered by investor compensation schemes. |
Self-custody or exchange - counterparty risk on the investor With direct crypto, the investor either self-custodies (managing private keys, seed phrases, and wallet security) or relies on a crypto exchange that may not be subject to the same segregation and compensation rules as a regulated broker. Exchange insolvency or a lost private key can result in permanent loss. |
| Loss offset | Offsettable against other financial instrument gains Because ETPs are regulated financial instruments, losses in most EU jurisdictions can be set off against gains from shares, bonds, or other ETFs in the same tax year, reducing the investor's overall tax liability. |
Often restricted to crypto gains only Direct crypto losses are frequently ring-fenced by national tax law and can only be offset against gains from other crypto disposals - not against gains from shares or ETFs. In some jurisdictions no offset is available at all. |
Neither route removes the underlying volatility of crypto. Bitcoin, Ethereum and other digital assets remain highly volatile regardless of the wrapper used to hold them, and an investor in a crypto ETP can still lose some or all of their capital. The ETP structure changes the operational and regulatory environment around the exposure - it does not change the market risk itself.
Important Disclaimer: The comparison table shown above is for information purposes only and does not constitute legal advice, investment advice, tax advice, or a solicitation to buy or sell any financial instrument. It is directed at private investors and is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would be contrary to local law or regulation. Exchange-Traded Products (ETPs) referenced herein are financial instruments regulated under MiFID II and listed on regulated exchanges. Investors should note that while the ETP is listed on a regulated exchange, the underlying cryptoassets are not regulated financial instruments and are not covered by investor compensation schemes. The value of investments and any income from them can fall as well as rise. Past performance is not a reliable indicator of future results. Investors may not recover the full amount invested. Cryptoassets are highly volatile and speculative in nature. Their value can fluctuate significantly and investors could lose all of their investment. Tax information is indicative, based on publicly available national legislation as of 11 May 2026, and is subject to change without notice. Individual tax outcomes depend on personal circumstances and the jurisdiction in which the investor is resident. This table does not constitute tax or legal advice. Investors should consult a qualified tax adviser and/or legal adviser in their jurisdiction before making any investment decision.
How can a crypto ETP be bought?
Crypto ETPs trade on regulated exchanges across Europe and the UK, including Deutsche Börse's Xetra, SIX Swiss Exchange, Euronext, the Vienna Stock Exchange, and - since October 2025 - the Main Market of the London Stock Exchange. They can be bought and sold through an investor's ordinary bank or brokerage account, in the same way as any listed share or ETF, without the need to open a separate crypto exchange account or manage a wallet.
Bitwise, for example, lists its ETP range across all of these venues. To learn more how Bitwise ETPs can be bought, visit this information page.
How do crypto ETPs work in detail?
The sections above cover what investors may want to know to research, compare and buy a crypto ETP. This part goes a layer deeper into the operational mechanics behind a physically backed structure. It's more technical than the rest of this article - readers who want to understand exactly how a crypto ETP stays backed day to day can continue below; others may prefer to skip ahead to the FAQs for a quicker summary.
(a) What does "physically backed" mean?
"Physically backed" or “fully backed” means that for every unit of the ETP in issue, the issuer holds a defined amount of the actual underlying asset - real Bitcoin, Ethereum or other tokens, held in regulated cold storage custody - rather than a derivative, a synthetic replica, or an unsecured promise to pay. This is the opposite of a synthetic product, which might use swaps or futures to track an asset's price without ever owning it, and it is what separates a backed ETC-style structure from an unbacked ETN.
Three mechanisms work together to keep a physically backed ETP backed in practice.
(b) Creation and redemption
Units of the ETP are not simply issued or cancelled on demand. New units are created only once new cryptocurrency has been delivered into custody, and units are redeemed only once the corresponding cryptocurrency has been released. This link between "units outstanding" and "coins in the vault" is what keeps the product fully collateralised at all times, and it is verified by an independent administrator at each step (see point d, below). For an animation depicting the creation and redemption mechanism in more detail, the ETP structure flow diagram can be explored.
(c) Authorised Participants
The regulated financial institutions that carry out the creation and redemption process, and that provide liquidity for the ETP on the stock exchange, are known as Authorised Participants (APs). APs are regulated financial institutions that place the buy and sell orders that keep the order book active and the ETP's exchange price closely aligned with the value of the underlying cryptoasset or basket of cryptoassets. They play the same role for a crypto ETP that other market makers play for a conventional ETF - in fact, many of the same firms provide liquidity across both conventional ETFs and crypto ETPs on European exchanges.
Bitwise, for example, publishes the current list of its Authorised Participants here: List of Bitwise's Authorised Participants
(d) Independent verification
Because the structure depends on the underlying coins genuinely being held in custody, some issuers appoint an independent transaction administrator that must approve every movement of cryptocurrency into or out of custody before it can take place - a safeguard that Bitwise in Europe was the first issuer to build into a European crypto ETP. Not every issuer includes this layer of independent oversight, and fewer still publish the results, but where it exists, investors don't have to take the backing on trust alone.
Bitwise, for example, has its custody balance checked with every operational movement by the independent administrator, with the balances of cryptocurrencies backing the respective ETPs published as a weekly balance report: Weekly balance report / proof of holdings
This structure reduces certain operational risks (unauthorised movement of assets, undisclosed shortfalls in custody) but does not remove market risk: the value of a physically backed crypto ETP still moves directly with the price of the underlying cryptoasset, including on the way down.
Important note: The description of the administrator approval process and verification cadence above reflects the mechanism as set out in the relevant base prospectus and final terms at the time of writing. The specific custodian, administrator and verification frequency for any individual product should be confirmed against its current prospectus and factsheet, as these arrangements can change over time and may differ by product and issuer. References to a product feature being among the first of its kind in the European market reflect publicly available information as of the date of publication.
FAQs
Is a crypto ETP the same as a crypto ETF?
Not exactly. "ETP" is the umbrella term; "ETF" is one specific legal structure within it (a UCITS-style fund). European crypto-token-backed products are structured as ETNs/ETCs rather than UCITS ETFs, though the term "ETF" is often used informally to describe them.
Are crypto ETPs regulated by MiCA?
No. Crypto ETPs are financial instruments under MiFID II and are distributed under the EU Prospectus Regulation. MiCA explicitly excludes instruments that already qualify as financial instruments under MiFID II, and instead governs crypto-asset issuers and service providers such as exchanges and custodians.
What are the main risks of investing in a crypto ETP?
A crypto ETP does not remove the risks of investing in cryptoassets, and an investor should understand these before investing. The most important are:
- market risk: the underlying cryptoasset is highly volatile, its price can fall sharply, and an investor may lose some or all of the capital invested;
- liquidity and pricing risk, as the ETP's price on the exchange can diverge from the value of the underlying asset, particularly in stressed markets;
- issuer and custody risk: the investor relies on the issuer, its custodian and the enforceability of the collateral arrangements even in a physically backed structure;
- regulatory risk: changes in law or regulation could affect the product or the underlying asset.
Products that stake the underlying tokens carry additional staking-specific risks (see below). The full risk factors for any product are set out in its base prospectus and Key Information Document (KID), which an investor should read before investing.
What risks does a physically backed ETP structure address, and which remain?
A physically backed structure, with independent verification of custody, such as Bitwise’s European ETP structure, is designed to reduce operational risks such as unauthorised movement of assets or unverified shortfalls in custody. It does not reduce market risk: the price of the underlying cryptoasset can still fall sharply, and crypto ETPs are not covered by deposit or investor-compensation schemes in the way bank deposits are. A comprehensive list of risks is set out in the relevant base prospectus, with a summary also available on the risk warning page.
Can investors earn staking rewards through a crypto ETP?
Some ETPs incorporate staking, where the underlying tokens are staked and rewards may accrue within the ETP. Staking can also introduce additional risks, including the potential loss of staked assets (for example through validator penalties or "slashing") and lock-up or unbonding periods during which the underlying assets cannot be freely accessed. This can affect the product's return relative to holding the unstaked asset directly. Not all crypto ETPs offer this; investors are advised to check the individual product's prospectus and factsheet. Bitwise's own staking ETPs are described in more detail on the Educational Guide on Staking with ETPs page.
How are crypto ETP gains taxed in Europe?
Tax treatment varies by country of residence and is subject to change, so no single answer applies across Europe. In general, gains on an ETP held in a brokerage account are taxed under each country's rules for financial instruments, which in many jurisdictions differs from the tax treatment of direct crypto holdings. Investors should consult a qualified tax adviser in their own jurisdiction.
Can US investors buy European crypto ETPs?
No. European crypto ETPs are not registered under the US Securities Act of 1933 and cannot be offered or sold to US persons. The reverse also applies: US-listed spot crypto ETFs are generally not distributed to retail investors in the EU or UK.
What happens to a crypto ETP if the issuer becomes insolvent?
Because a physically backed crypto ETP's underlying coins are held by an independent, regulated custodian and segregated from the issuer's own balance sheet, the intention of the structure is that those assets are not treated as part of the issuer's estate in an insolvency. The specific insolvency protections (including any trustee arrangement) vary by issuer and product, so investors should review the relevant prospectus and risk factors rather than assume a uniform standard across the market.
What fees do crypto ETPs charge?
Crypto ETPs typically charge an annual management fee, expressed as a percentage of assets (similar to a traditional ETF's total expense ratio) and disclosed in the product's prospectus and Key Information Document (KID). Fees vary by product and issuer.
Important Information
This marketing communication is provided for informational purposes only. It does not constitute investment advice, a personal recommendation, or an offer or solicitation to buy or sell any financial instrument.
This document (which may take the form of a presentation, press release, social media post, blog article, broadcast communication or similar instrument – collectively referred to as a “Document”) is issued by Bitwise Europe GmbH (“BEU” or the “Issuer”) and has been prepared in accordance with applicable laws and regulations.
BEU, incorporated under the laws of Germany, is the issuer of the Exchange Traded Products (“ETPs”) under a base prospectus and the applicable final terms, as supplemented from time to time, approved by the German Federal Financial Supervisory Authority (BaFin). The approval of the prospectus by BaFin relates solely to the completeness, coherence and comprehensibility of the prospectus in accordance with the Prospectus Regulation and does not constitute an endorsement, recommendation or assessment of the merits of the products.
BEU has issued an ETP with HYPE as the underlying asset. Readers should be aware of this interest when considering the analysis contained in this document. The base prospectus, final terms and additional risk information are available at: www.bitwiseinvestments.eu
Capital at risk. Cryptoassets are highly volatile and involve a high degree of risk. The value of investments in cryptoassets and crypto-linked ETPs may fluctuate significantly, and investors may lose part or all of their invested capital. No capital protection or guaranteed compensation mechanism applies in respect of market losses.
Important Analytical Limitations: The observations and analyses presented in this document are based on historical market patterns and data correlations which may not repeat or continue in future market conditions. Past correlations between capital flows and performance metrics are not indicative of future performance and should not be extrapolated as predictive indicators. Material downside risks remain present across all investment timeframes regardless of current undervaluation metrics or favorable technical indicators. All model outputs, fair value calculations, and quantitative assessments are subject to significant uncertainty and methodological limitations, and should not be relied upon as the sole basis for making investment decisions.
Notes
[1] MiCA, the EU's Markets in Crypto-Assets Regulation (fully in force since the last national transitional arrangements lapsed on 1 July 2026), governs crypto-asset issuers and crypto-asset service providers such as exchanges, custodians and brokers dealing directly in coins and tokens. MiCA explicitly does not apply to instruments that already qualify as financial instruments under MiFID II - a carve-out that a crypto ETP tracking the spot price of Bitcoin falls into, because it is regulated as a security rather than as a crypto-asset
The UK runs a separate regime. The FCA banned the sale of crypto-linked exchange-traded notes (cETNs) to retail investors in January 2021, then lifted that ban from 8 October 2025, reclassifying them as Restricted Mass Market Investments (RMMIs) - products retail investors can access, subject to enhanced risk warnings, through FCA-authorised platforms. To list on the London Stock Exchange's Main Market, an issuer needs a UK base prospectus approved by the FCA, separate from any EU prospectus. Once approved, an issuer can bring new products to market under that base prospectus from time to time, without seeking fresh approval for each individual listing under an approved base prospectus.
The UK runs a separate regime. The FCA banned the sale of crypto-linked exchange-traded notes (cETNs) to retail investors in January 2021, then lifted that ban from 8 October 2025, reclassifying them as Restricted Mass Market Investments (RMMIs) - products retail investors can access, subject to enhanced risk warnings, through FCA-authorised platforms. To list on the London Stock Exchange's Main Market, an issuer needs a UK base prospectus approved by the FCA, separate from any EU prospectus. Once approved, an issuer can bring new products to market under that base prospectus from time to time, without seeking fresh approval for each individual listing under an approved base prospectus.
