Switzerland’s financial regulator FINMA has approved the country’s first retail exchange-traded fund (ETF) under Swiss law to invest directly in Bitcoin.
The decision includes a diversification exemption, allowing the fund to hold a concentrated position in Bitcoin while remaining within Switzerland’s legal framework for funds carrying particular investment risks.
FINMA said in its 20 October announcement that Bitcoin’s long trading history and particularly high trading volume, compared with other cryptocurrencies, justified the exemption.
The fund will be classified as one of Switzerland’s “other funds for alternative investments with particular risk”. Normally, funds in this category must meet applicable diversification requirements, but the exemption allows this product to focus on Bitcoin.
The approval distinguishes the fund from exchange-traded products (ETPs) already familiar to Swiss investors. SIX, Switzerland’s main exchange, describes ETPs as collateralised debt securities rather than collective investment funds.
Although both structures can provide exposure to Bitcoin, a fund that invests directly in the cryptocurrency is legally different from a debt security whose value is linked to Bitcoin’s performance.
FINMA did not identify the fund’s issuer, disclose its fees or announce when trading would begin. The approval therefore does not indicate when investors will be able to buy or sell the product, or how much it will cost.
The regulator added that other providers had submitted or announced applications for Bitcoin ETFs, but said no further approvals had been reported.
Custody and investor safeguards
FINMA said supervised institutions must continue to limit operational and custody risks, referring to its 12 January guidance on the custody of crypto assets.
That guidance requires technical expertise, strong infrastructure and the use of providers that are monitored appropriately. It also sets out bankruptcy protections intended to ensure customers’ crypto assets remain outside a custodian’s bankruptcy estate.
Responsibility remains with the authorised financial institution even when an external custody provider is used. FINMA said the requirements were designed to help safeguard investors’ assets.
At the point of sale, institutions offering crypto-linked instruments must comply with the Swiss Financial Services Act (FinSA). FINMA highlighted the need for clear warnings about volatility and potential losses, as well as careful assessments of whether an investment is appropriate or suitable for a customer.
Fund documentation must also explain the associated risks prominently. Those measures govern how the assets are held, how the investment is presented and how it is sold, but they do not remove the market risk faced by investors.
FINMA warned that investors could suffer substantial losses as a result of sharp price movements, even when gaining exposure through an approved ETF. The diversification exemption offers no protection if Bitcoin’s price falls.
Bitcoin was up 1.19% over the previous 24 hours and ranked number one by market capitalisation, according to the information provided.
