Fineqia Internationals’ Bitcoin Yield ETP hits C$15M in assets under management - ICYMI

Fineqia International Inc (CSE:FNQ, OTC:FNQQF) CEO Bundeep Singh Rangar talked with Proactive about the strong early traction of the company’s Bitcoin Yield ETP product, YBTC. 

YBTC has quickly surpassed C$14.9 million in assets under management, driven by what Rangar described as a “triangulation” of factors: high demand for bitcoin, Europe’s regulatory framework enabling yield generation from on-chain activities, and growing institutional appetite for passive income products.

Proactive: Hello, you’re watching Proactive. I’m joined by Fineqia International CEO Bundeep Singh Rangar. Bundeep, very good to speak with you again. YBTC has already surpassed 14 million CAD in assets under management, and that’s quite soon after launch. What factors do you think are driving such strong early demand, and how scalable do you see this product becoming over the next 12 months?

Bundeep Singh Rangar: Hi, thank you for having me here, always a pleasure. We’ve actually hit almost a million more than we announced before. So we’re getting to about maybe 15 million Canadian dollars, about 14.9 million Canadian dollars, which is great. What we’re tapping into is this triangulation of three things. One is an incredible amount of demand for bitcoin. You’ve seen bitcoin treasury companies following the MicroStrategy playbook. You’ve seen Nakamoto, Metaplanet, various other companies effectively emulating that because bitcoin is seen to be a long-term hold for many companies and investors. It’s an asset that’s growing in value.

Two, you have this flood of interest in ETFs. Last year, about 35 billion dollars flowed into bitcoin-based ETFs. That’s been unprecedented in ETF history. The fastest rise to 10 billion when they launched ever before—it surpassed gold, which was the previous benchmark.

We are playing to two other trends. One is high demand for BTC, which is institutional. The second is that Europe has a sort of lead in the global ETF space. About 60% of all crypto-based ETFs and ETPs are based in Europe. That’s about 150 products and about 17.5 billion dollars in AUM. Europe has been at the forefront of regulating these and providing guidance on not only buy and hold, which is currently what’s available in North America, but the next step for ETFs is to generate yield. These are like software layers where people are building apps and generating transactions, and this fee is made from that. If you add decentralized finance, which involves lending, borrowing, providing liquidity, and generating yield from tokens, you can enhance your yield to some pretty respectable numbers.

The last trend is this institutional demand for yield. Surveys show that 70% of institutions would like a product that’s digital asset-based but also gives them passive income. About the same number are looking to increase allocations to digital assets in the next year. You take the triangulation of very high demand for BTC, Europe’s regulated framework that allows yield generation from on-chain activities, and this institutional demand for yield—and we just hit the nail on the head. We’re probably the only ETP/ETF issuer in the world that can get yield from on-chain activities including decentralized finance. So when we went out with a DeFi-based product with a targeted 6% yield, that just resonated with the market. You’re seeing the results with this nearly 15 million dollars accumulated in about a week’s time.

As you said, YBTC targets a 6% annual yield by engaging in DeFi lending and liquidity provisioning. How do you manage counterparty risk and ensure consistent returns in such a volatile DeFi environment?

Great question. We’ve been working with a party, Psalion, which has been doing this activity for a couple of years. They have a great track record. If you look at where people lose money—in 2023 about 1.8 billion dollars was lost in on-chain wallet thefts or hacking. So we don’t go to young protocols. We don’t go to early-stage ones that are still managing their risks and buffering up their security. We go to very established pools that are well-tested and generating yield in a safe way. We take counterparty risk with very established players and with a partner that’s been doing it for a while now.

DeFi, as you know, is up and down sometimes. The yield is not always going to be there. Some months you get higher yield, some months it’s lower. But if you take the trend across, that target is achievable. We’re giving guidance around that. The actual numbers will be up or down slightly, but by managing risk and going to more secure protocols with a track record in DeFi and partnering with a company that has done this for a while, we’re mitigating that risk for investors.

With other bitcoin ETPs in the market, what sets YBTC apart from competitors beyond the yield components? Why should an investor pick your product over a traditional bitcoin tracker?

Most of them do not give yield. In North America, for sure, you don’t get yield. There is one in Canada that does give yield, but not on-chain, which is where we are different. It is through a covered call option strategy, where you get yield on a monthly basis. But because you have these options to exercise, you are also capping the upside.

So the choice has been: either you go to a pure play bitcoin product where you get the appreciation of the token value. If bitcoin goes up 100%, you get the full upside, but you don’t get yield when it’s down. Institutional investors like to have consistent yield returns regardless of volatility.

If they take option number two with the covered call strategy, they get some yield but cap their upside. If bitcoin goes up 100%, they only get 40% of the upside.

What we’ve tried to do is bridge those two worlds. We can actually give you the full upside. You’re not compromising anything in BTC price movement. We will also give you yield we think will be consistent at around 6%. That’s really what makes a difference. YBTC, as the name suggests, is yield of BTC, and it’s from DeFi, which no one else can do.

You’ve now successfully launched the YADA and YBTC. Do you have any other products in development to expand your portfolio?

We are looking at a multiple set of coins in a similar strategy. You look at what’s happening in the digital asset treasury space—companies accumulating bitcoin, Solana, Sui, Bittensor—and they are giving investors access via a listed stock. Those companies trade at a 2 to 5 times premium, which is unusual. Historically, listed companies with underlying assets usually trade at par to NAV, occasionally at a premium, quite often at a discount. Here, they are trading 2 to 5 times above NAV.

There is a scarcity factor—many institutional investors and family offices cannot buy digital assets directly, so they must buy a listed security. Secondly, they don’t want to be bothered with security and wallets. Third, they want engagement in yield generation.

We take care of all of that, and we give you a much cheaper price than the premium commanded by treasury companies. That’s the real sweet spot—tapping into sentiment, providing BTC exposure, and taking care of custody and deployment for yield generation.

Given YBTC is the first regulated ETP combining bitcoin exposure with DeFi yield on-chain, how do you see regulatory frameworks evolving in Europe and beyond? Are you planning listings on additional exchanges or targeting new markets?

We are looking at listing the product on different exchanges in Europe. We are looking at Euronext, for example. With our YADA product, we started in Vienna, then moved to Stuttgart, which has higher retail investor participation. We are looking at other exchanges. With YBTC, we’ll follow a similar path.

We also have our eyes on Euronext because it is pan-European. As we look at more products and exchanges, exchanges are becoming more comfortable accepting different cryptocurrencies and yield strategies. The challenge was that we were almost too early. We created a very innovative product. We had the first DeFi permissions from the regulator. It took time to get some parties on board, such as FTSE Russell for the index provision and Lang & Schwarz for our authorized participant and market-making activities.

Once we crossed that hurdle, we faced some challenges with exchanges. They didn’t necessarily say no, but also didn’t say yes. It took time to crack that. We got to Vienna, which was receptive. About a third of all crypto ETFs in Europe are listed there. So we have an innovative challenger exchange in Europe. We will continue working with them as we look at a wider reach across other exchanges. As far as other jurisdictions, we’re not there yet, but never say never. We’re also looking at other coins and jurisdictions.

Quotes have been lightly edited for clarity and style