FINMA Approves Switzerland’s First Retail Bitcoin ETF

Switzerland’s financial regulator FINMA has approved the country’s first retail exchange-traded fund under Swiss law to invest directly in Bitcoin. The approval allows the fund to concentrate on Bitcoin after FINMA exempted it from applicable diversification requirements.

In its Oct. 20 announcement, FINMA cited Bitcoin’s long trading history and high trading volume compared with other cryptocurrencies as grounds for the exemption. The fund will be classified as an “other fund for alternative investments with particular risk.”

FINMA did not name the issuer, disclose management fees or provide a date for when trading will begin. Approval does not mean investors can trade the fund immediately.

The regulator said other providers had submitted or announced applications for Bitcoin ETFs, but it did not report any additional approvals.

The approved fund is legally different from Bitcoin exchange-traded products listed on the SIX Swiss Exchange. Those products are structured as collateralized debt securities, while the approved fund is a collective investment vehicle.

Institutions involved in the fund must continue to manage operational and custody risks. FINMA’s custody guidance calls for technical expertise, reliable infrastructure and oversight of external service providers. It also requires customers’ crypto assets to remain outside a custodian’s bankruptcy estate.

Using an external custodian does not remove the authorized institution’s responsibility for protecting the assets, according to FINMA’s requirements.

Institutions selling crypto-linked investments must comply with the Swiss Financial Services Act. Sales materials must explain Bitcoin’s volatility and the possibility of losses. Firms must assess whether the investment is appropriate or suitable for each customer, and fund documents must clearly disclose the risks.