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German crypto certificates

As the Frankfurt Certificate Exchange marks its 15th anniversary year, cryptocurrencies have once again emerged as the most popular structured product certificates in Germany.

With unmatched trading volume, a Bitcoin (BTC) tracking certificate had the highest volume for a second-year in a row.

The research, published annually by Deutsche Börse, found that volume for crypto certificates was valued at more than €1bn in 2021. This accounts for 5.4% of the combined €18.4bn trading volume on the Frankfurt-based exchange last year.

In Germany, ‘certificates’ are structured derivatives products that securitise participation in the price development of particular security or securities products (similar to warrants in the UK and USA).

Impressive trading volume, stems from 3.4m transactions with an average value of €5,438.

Surprise year-on-year decrease

The analysis notes that this represents a surprising year-on-year decrease from the 3.9m transactions of 2020 – something perhaps linked to the German Bundesrat’s approval of a the Fund Location Act – which green-lights funds to allocate up to 20% of holdings to digital assets such as Bitcoin and Ethereum.

This has opened up significant new avenues for retail customers to gain managed portfolio exposure to cryptocurrencies outside of the Frankfurt derivatives market.

Speaking on the success of the Frankfurt Warrants crypto offerings, Florian Claus – a board member of Börse Frankfurt Zertifikate AG explained the explosion in digital asset certificates last year.

“With over 900 products on a total of 29 crypto underlyings, we now offer the largest range of crypto products in the certificate sector in Germany,” explained Claus.

“This enables investors to trade cryptocurrencies quickly and easily via their own securities account.”

The high volume has been tied to a VAT reduction model offered by the Frankfurt exchange.

“Since July 1 2021, we have waived the calculation of value-added tax on the transaction fees paid by our trading participants at the Frankfurt warrants-exchange,” added Simone Kahnt-Eckner, fellow board member of Börse Frankfurt Zertifikate AG.

“This means that private clients and issuers can save up to 19 percent on the trading of around 1.4 million investment and leverage products in Frankfurt compared to other trading venues.”

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