Metaverse ETP Gains Approval in Europe

DeFi Technologies subsidiary Valour is set to launch an exchange-traded product focused on the metaverse in Europe as companies continue gravitating to the space.

The firm’s Metaverse and Gaming Index ETP was approved by the Swedish Financial Supervisory Authority (SFSA) and has regulatory approval for distribution across the European Union.

The ETP will consist of an index of the top five digital assets related to the metaverse, which is a network of virtual environments and economies created through gaming, virtual reality, social networking and crypto. Digital asset projects focused on the metaverse include virtual world platforms like Decentraland (MANA) and play-to-earn games, such as Axie Infinity.

The approval follows Facebook rebranding to Meta in October as CEO Mark Zuckerberg called the metaverse” the next frontier.” Other companies, such as Nike, Louis Vuitton and Disney, have also announced plans to move into the space. 

The metaverse market could present an $800 billion revenue opportunity by 2024, Bloomberg Intelligence analysts Matthew Kanterman and Nathan Naidu wrote in a Dec. 1 research note, up from about $500 billion in 2020. 

Diana Biggs, Valour CEO and chief strategy officer of DeFi Technologies, described the metaverse’s development as the next iteration of the internet.

“The value layer, powered by blockchain technology – crypto, NFTs – is an extremely important element in this merging of physical and digital realities as it provides the economic infrastructure, which is such an essential part of how we live our lives, how we interact, how we work and play,” she told Blockworks.

Valour also offers fully hedged investment product with bitcoin and ether as underlying holdings, as well as ETPs focused on UNI (Uniswap), ADA (Cardano), DOT (Polkadot) and SOL (Solana). 

“We definitely want to continue exploring thematic investment products as the digital asset space continues to develop and more use cases and applications become apparent,” Biggs said. “We have been in the extremely early stages of this technology and now, at this stage of growth, we will continue to see more real-world applications.”

Moving to the metaverse

Evolve ETFs and Horizons ETFs launched the first metaverse offerings in Canada last month, and South Korea already has many metaverse ETFs.

Roundhill Investments launched the first metaverse-specific ETF in the US on June 30. The Roundhill Ball Metaverse ETF (META), which has an expense ratio of 75 basis points, has grown to $817 assets under management, according to ETF.com. 

META’s top five holdings are NVIDIA Corporation, Roblox, Microsoft, Meta Platforms and Unity Software. It has returned -0.6% over the past three months, as of Dec. 6, FactSet data shows.

First Trust filed last week to launch a metaverse-focused offering. It will invest in companies  developing virtual-reality spaces integrated with artificial intelligence and 3D technologies where users can interconnect within a computer-simulated environment, the document states.

“It’s a generational change and would take years or even decades before we get to the fully formed metaverse,” said Neena Mishra, director of ETF research for Zacks Investment Research. “ETFs present a safer way to get diversified exposure to the space that would continue to evolve over the coming years.”

ETF sponsors are always quick to capitalize on hot trends, she told Blockworks, adding that she expects to see more metaverse-themed ETF launches in the coming months, in the US and globally.

“I expect more interest from investors in the metaverse ETFs than in crypto-related offerings, particularly in [the] absence of spot crypto ETFs,” Mishra said.

It remains unclear when the US Securities and Exchange Commission (SEC) will allow ETFs that invest directly in crypto assets.

Ryan Issakainen, an ETF strategist and senior vice president at First Trust, noted that the firm already offers many thematic ETFs that invest in a variety of high-growth, technology-related areas. The firm has 190 ETFs trading in the US with combined assets under management of nearly $150 billion, according to ETF.com.

“We thought it was a good time to bring a [metaverse] option for investors,” he told Blockworks, noting the Facebook rebrand and other emerging use cases for the space. “We think we’ll provide a good way to get targeted exposure to companies that will benefit from that trend.”

Roundhill Investments’ META has seen $754 million enter the fund since Facebook’s announcement on Oct. 28, according to FactSet data.

“Our product will have significant differences between any of the incumbent products out there,” Issakainen said. “When we launch a new fund, we’re not looking to clone what someone else has done.”

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