Coinshares International Ltd

STO:CS

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Thank you for standing by, and welcome to the CoinShares Q1 Earnings Broadcast. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host, Jeri-Lea Brown. Thank you.

[Jeri-Lea Brown, executive]

Thank you, operator. I would like to welcome you all to the CoinShares 2024 Q1 Earnings Call and Webcast. Speaking from management today will be Jean-Marie Mognetti, Chief Executive Officer; and Richard Nash, Chief Financial Officer. All those joining today are encouraged to log into the live event where you'll be able to view the accompanying presentation during today's call. Alternatively, the results and a copy of the presentation are available to download from the Investor Relations section of the CoinShares website.

A replay of the webcast will be available for 30 days following the live call and a transcript will be posted on the company's website as soon as it is available. Following the presentation, we will host a short Q&A via the webcast platform. Should you wish to submit a question to the management team, please provide your name and company affiliation. We will do our best to get to as many of these as we can in the allotted time. Lastly, our safe harbor statement.

CoinShares would like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements, and I would like to point you to the risk factors associated with our business, which are detailed in our prospectus. At this time, I will turn the call over to Jean-Marie.

[Jean-Marie Mognetti, executive]

Good afternoon, everyone, and thank you for taking the time today to join us and hear about CoinShares activity during Q1 2024, a historical quarter on more than one account. So Q1 2024 is our most successful quarter ever. Q1 2024 is marking a period of unmatched trends and profitability for CoinShares. Richard will give us all detail on that soon. And before we delve into the specifics of our Q1 business activities, let's first take a look at the pivotal development for both the industry and CoinShares during December quarter.

In January 2024, the U.S. SEC granted approval for 11 spot bicorn ETFs, signaling a significant shift towards integrating digital assets into the mainstream financial markets. This approval is a testament to our long-standing advocacy for the integration of digital assets, which has been part of our vision for over a decade in Europe. It doesn't only reflect the increasing acceptance of digital asset, but also strongly validates CoinShares' initial investment approach, which focuses on the institutional adoption of digital assets and democratizing access to these assets through regulated listed products.

In line for the calendar, we completed in March 2024, the acquisition of Valkyrie's ETF business. The strategic acquisition includes a few things. First, a registered investment adviser. Second, the sponsor right of a 33 act ETF through Valkyrie's spot Bitcoin ETF and third a sponsor right of a 40 act ETF platform issuing right now through ETFs, one of them being WGMI, a very specialized Bitcoin miner ETF. CoinShares benefited from great timing and execution of this deal. As a reminder, the U.S. [ ETM ] journey was started by the Winkle was broader back in 2014. CoinShares as discussed with analysts at the time who were deliberately not part of the race at the end of Q3 2023 for the lack of the right opportunity.

This move in the U.S. is crucial as it aligns with our commitment to becoming a leading global investment company specializing in digital App. The integration of our U.S. colleagues will enable us to enhance our operating model across risk, compliance, trading and distribution, which is vital for our ability to compete on a global stage. Indeed, the U.S. market accounts for 50% of global assets under management and offers unique opportunity for CoinShares in terms of growth. The pricing panic on December 29, '23, among U.S. ETF issuer following some late Friday night, Twitter battle, caused serious challenges for most U.S. spot Bitcoin issuer.

Let me do some quick math here, 25 basis points headline revenue numbers and assuming custody is your main cost issuer I'm left with 11 basis points of gross profit ad-base. That means not much net revenue at all, especially if you need to share that [indiscernible] sponsor. Bottom line, unless you have tens of billions of dollars of AUM in this product line, it is a loss-making one. In this environment, our U.S. spot Bitcoin ETF is positioned to be a door-buster asset in the U.S., which we want to operate at breakeven. Our profitability in the U.S. will not come from what we have been doing in Europe for 10 years, that will be way too easy, but from more sophisticated products, highlighting our strategic focus.

While competition in the U.S. is fierce, especially for industry giant BlackRock and Pidilite, we accept that our strategy cannot lie in competing with these well-established entities with massive distribution networks. Instead, our competitive advantage is rooted in our deep expertise in the digital asset space and our hedge fund DNA, which resonate with American investors. Looking forward, we are poised to introduce more actively managed strategies across our [indiscernible] identity, anticipating the evolution of the ETF sector.

We do believe that CoinShares this sector will increasingly blend the sophistication of hedge fund with the accessibility of regulated messy products such as ETPs. Our deal tranches in entrepreneurial product structuring and active asset management, coupled with our technical understanding of the digital asset sector aim to redefine industry standards and position CoinShares at the forefront of innovation in the financial world. Okay. I can see our company secretary telling me with her hand I need let our CFO speak. So without further delays. Let's take a look at our Q1 financials, and I'm glad to be joined by Richard Nash to present these results. Richard, over to you.

[Richard Nash, executive]

Thanks, Jean-Marie. So as one would expect, given the price movements and the overall activity in the market since the start of the year, we have had a very strong 3 months across all aspects of the business. The group's adjusted EBITDA for the period has landed at GBP 34.2 million, which is our strongest ever quarter. Obviously, this has been largely due to the price action experienced thus far in 2024, but we're happy to report that as the group continues to grow and evolve, the top line performance is becoming increasingly diversified with less reliance being placed on our legacy products as time moves on.

Of our total revenue gains and other income, around 45% comes from our asset management business, around 40% from Capital Markets and then the remaining 15% for Q1 comes from our principal investment portfolio. The balance between the 2 main points of the business, asset management and capital markets is consistent with what we have experienced historically. Both business units, of course, thrive when the market is rallying and they have both posted around 50% of 2023's entire performance in a single quarter.

Additionally, we are still heavily focused on keeping control over our cost base to allow such market rallies to impact our bottom line as much as they possibly can, and we are also, therefore, happy to report an adjusted EBITDA margin for the quarter of 78%. This margin is starting to return to levels we experienced back in 2021, and we will continue to do all we can to try and maintain these levels while improving the infrastructure of the wider group.

Moving down to total comprehensive income, which this quarter is largely equivalent to EBITDA, we have generated a total of GBP 34.1 million and this translates into an adjusted earning per share of GBP 0.50 over the 3-month period to March. While the quarter has been remarkable in so far as it is our best ever quarterly financial result, it has actually been rather unremarkable in other regards. And it's business as usual, a stable cost base and steady diversification of top line in a scalable manner that allows us to reap the benefits of positive movements in the market. So now looking a little bit more closely at our asset management platform.

And as a reminder, the components of this business unit as of the end of 2023, where XBT provider, our CoinShares physical ETPs and the CoinShares blockchain Global Equity Index or Block Index. This has now been expanded upon following the successful acquisition of Valkyrie Funds LLC, as we announced in the middle of March. While our financials for Q1 only reflects around 2 weeks of management fees from these products, as Jean has already made reference to earlier in this presentation, this is a very significant step forward for the group for a variety of reasons.

The story within asset management is very consistent with that of the overall group for Q1. performance is a reflection of the movements in the wider market, coupled with cost control and solid margins. And as can be seen from the table here, the overall gross profit margin of the group's asset management platform remains very healthy and very stable. The management fees for the quarter of GBP 19.5 million are the group's second highest on record just behind the Q4 2021. But now we're seeing more diversification than ever with CSDS becoming a larger proportion of overall fees each and every quarter.

Q1 for CSDS is already in excess of 2023 in its entirety. A core driver for this performance in addition to the usual drivers at flow and at price was the introduction of staking capabilities on the CoinShares physical Ethereum product, which has brought a material benefit to both CoinShares and note holders alike. This has more than offset any reduction in fees arising from the decision to reduce the management fee on CS physical Bitcoin for 90 bps to 35 bps.

And as this quarter we've seen is hopefully an indicator of the rest of the year to come for CS physical. Combination of flow and price movements has resulted in CoinShares fiscal AUM increasing by 64% in the quarter from GBP 567 million to GBP 932 million. XBT meanwhile, opened the year at an AUM of approximately GBP 1.87 billion and closed the quarter with GBP 2.89 billion.

So this AUM growth, coupled with the Valkyrie acquisition and the Block index performance for the quarter, which is also strong at GBP 400,000 of fees, brings the total group AUM as of the end of Q1 2024 to GBP 4.77 billion. As I always like to remind everyone, the flows for our ETP product suites and those of all our key competitors is published in our weekly digital funds flow report, which is available on our website.

And additionally, the level of AUM held within each of our products is disclosed and subject to daily attestation by Ledger Lens, an independent [ financial ] solution, which is embedded into our website designed to provide additional transparency and comfort to all our stakeholders. And over the coming quarter or so, we will look to integrate this solution with our newly acquired products within the Valkyrie Funds product suite. Moving on to capital markets.

The performance of the capital markets business unit in Q1 continues to demonstrate the benefit that diversification of activities can bring, resulting in total income and gains for the quarter of GBP 17.3 million. The business unit's performance has brought with it a solid gross profit margin for the quarter of 90%. Trend has been consistently improving since the end of 2022 due to changes that we made internally to our infrastructure.

Liquidity provisioning of GBP 2.8 million arising from supporting the group's XBT provider products have already exceeded 2023 in its entirety due to the high level of flows we've experienced on the products following the price rally of Q1. Delta neutral trading strategies of GBP 0.6 million are a little bit down on last year, although we expect these to pick up during Q2 following a range of strategies deployed towards the end of Q1, which we expect to perform well and have already seen some benefit from moving into Q2.

Fixed income activities have started the year strong with our digital asset lending and the resulting yield increasing markedly over the quarter due to the price appreciation driving of the USD value of the digital asset denominated lending, generating solid yields from a small number of select lending counterparties. The main driver for the business unit, however, remains consistent with that of previous quarters, which is our staking income. The total value of staking yield generated over the first quarter of the year amounts to approximately GBP 5.9 million, which is over 50% of the overall capital markets performance.

And finally, the other gain in the quarter is driven by an FX gain from hedging activities undertaken [indiscernible] brokers being partially offset by losses associated with the poor performance of the group's CCO BCO funds, which represent the group's first products within its hedge funds Solutions products. So while I provide some closing comments, we can just take a look at the quarterly performance of the group since the start of 2021, which we always do to help visualize the quarter in context.

So as already stated, we have had our best quarter on record, both in terms of top line performance and adjusted EBITDA. We've got strong margins across the board, evidencing the scalability of our business model, and we see Q1 as an excellent stepping stone for the remainder of the year. And just a couple of things to note that we haven't touched upon yet. So firstly, we are very happy to announce that following the adoption of the new dividend policy for the group.

Our first dividend payment to shareholders has now been made earlier this month with the second payment due at the end of Q2. Secondly, post quarter end, we disposed of our holding in 3iQ at the price that was equivalent to our carrying value as at year-end, and we generated a gain of approximately GBP 2.3 million when compared to the initial cost price. And finally, just a point on our FTX claim. So as you may remember, we took a material hit in 2022 regarding our assets held on FTX.

And despite receiving multiple offers for our claim, we elected to hold on to it, and we are encouraged by the recent announcements in the market regarding the likelihood of recovery. While we are yet to recognize any of these amounts, our claims stands at approximately GBP 27 million. If recovered, this will result in a direct gain to the consolidated P&L of the group and a significant boost to our financial performance. Further details of everything I touched upon here are available in the Q1 report, which I encourage everyone to please take a closer look at. And now I will hand back over to Jean-Marie...

[Jean-Marie Mognetti, executive]

So Asset Management, the first quarter of 2024 in the crypto ETP market was largely defined by the significant impact of the U.S. spot Bitcoin ETF launches and a sustainable market in crypto assets. Notably, the asset accumulation of U.S. products exceeded expectations. The standout product by its gathering received $12 billion of AUM, while even the fourth is performing spot Bitcoin ETF are [indiscernible] over $1 billion of net new flow.

Also, a considerable portion of this asset likely shifted from substantial outflows from Grayscale's flagship products, the net new flows into the U.S. BTC ETF totaled nearly $10 billion for Q1. The introduction of major market players into the crypto product space, coupled with substantial interest from U.S. investors, marked a new phase in global crypto ETPs, characterized by intensified competition and a broader range of choices.

In response to this evolving market landscape, we reduced the fees of our CoinShares physical Bitcoin to 35 basis points in Europe. Despite facing substantial net outflow from BITC in Q1 totaling $51 million, and that's attributed to hedge from closing the spread position and capitalizing on the U.S. fee holidays, CoinShares digital securities experienced net inflow into all other products amounting to $35.7 million. Ethereum, Solana and Polcadot represented half of these net flows. When compared to competitors, CSDS maintained a leading position, ranking first or second inflows for 12 out of the 15 investment exposures offered on the platform.

XBT provider remains a cornerstone of CoinShares asset base and businesses concluding Q1 2024 with EUR 3.6 billion in assets. As Becomes new all-time pie and the broader cute market began a bull market phase, invested across various segments starting to realize profit leading to approximately 6.5% of overall asset being withdrawn outflows. These flows remain steady into the March 2 peak with a noticeable increase in derisking as they comprise decline from the old-time high.

This trend is mild and encouraging when compared to Q1 2021. We observed a loss of AUM of about $400 million versus $240 million in Q1 2024. We anticipate continued net outflow from the XBT platform as the crypto bull market persist as the majority of the XBT investor base hold substantial investor gains, it will likely continue. However, price acceleration during such a bull-run should offset these outflows in terms of dollar AUM.

The investor commitment to the long-term performance of Bitcoin and Ethereum remains strong with relatively modest profit taking despite significant price increases. During on our team experienced with gold product at ETF Securities, we note when normalized for volatility of the underlying outflows in crypto products are much severe than the one an issuer can experience in the gold market, for instance. CoinShares is actively engaging with regulators and listing the news to announce access for European investors to the safety and convenience of crypto investing within ETPs.

We are cautiously optimistic about forthcoming regulatory development, particularly in the U.K. and Italy, which will continue to share the investment landscape in the upcoming months. During the first quarter of 2024, our newly launched American product platform witnessed substantial growth marked by healthy inflows. Notably, despite the volatile performance of Bitcoin miner this year compared to 2023, our pure-play Bitcoin mining ETF successfully attracted significant investor interest.

This ETF amassed another $40 million of net income in Q1 without any dedicated marketing budget, underscoring the intrinsic appeal and market confidence in this product. On January 10, Valkyrie digital LLC introduced its spot Bitcoin ETF, following our acquisition of sponsorship right with Valkyrie Investment in March 2024. This product has distinguished itself by maintaining competitive advantage in term of fees, liquidity and slippage. By the close of Q1, it has achieved a remarkable GBP 452.5 million in net inflows.

Our strategic objective for this ETF is to provide a highly liquid and cost-effective Bitcoin investment option. Our focus remains on ensuring this operate cost affectively to avoid engaging in a lawsuit of pricing competition. Later in the quarter, Valkyrie Fund unveiled a new ETF designed to offer investors 2x leverage return on daily Bitcoin future prices. This innovative approach has garnered EUR 44.6 million net inflow by the end of Q1.

As the cryptocurrency market maintained its upward trajectory. And as we continue to enhance our operational integration and brand recognition in the U.S., we anticipate growing investor interest in this affordably priced leverage strategy ETF. So let's look at our capital market and H1 solution activity.

So let's start with our Capital Markets division, which experienced a strong quarter, benefiting significantly from the increased trading volume triggered by the launch of spot Bitcoin ETF in the U.S. This period of intensified activity was further amplified by increased market volatility, particularly noticeable in March, which supported our liquidity provisioning activities. Additionally, our staking activity has continued to generate consistent revenue. Our lending book remained well diversified and stable, extending across a variety of noncumulative counterparties.

This diversification plays a crucial role in our ability to manage risk effectively and maintain stability amidst market fluctuation. In response to the highly volatile market conditions, our team has intensified its focus on risk management and more particularly on counterparty risk management, which involves more frequent of the site of counterparties exposure and bias risk limits. It also involves reassessing some certainty we may have on certain counterparty in a different market environment.

A special note of gratitude is extended here to our operations team who have been exceptionally dedicated working around the clock to ensure that we operate within our designated risk framework. Their commitment has been instrumental in navigating the complexity of the current financial landscape. Meanwhile, the Hedge fund solutions division has been actively developing new trading strategy whilst adjusting to the new market dynamic introduced by the launch of the spot Bitcoin ETF. Building a solid track record is a gradual process, and the division is planning to expand the distribution capability in the U.S. over the next quarter.

This expansion will enhance our engagement with external LPs, enabling us to keep them well informed of our development and progresses. The strategic move is aimed at bolstering our position and maintaining momentum in evolving market position. All right, time to conclude this review. As outlined by previous communication, the Board of Directors has sanctioned a new dividend policy for the fiscal year 2023. This policy is a testament to our ongoing growth, strategic acquisition and ever-widening global footprint, all sustained by consistent profitability.

We have committed to rewarding our shareholders with an annual dividend paid quarterly in [indiscernible]. The first installment of this dividend was disbursed on the 3rd of May, and we have planned 3 more record date throughout the remainder of the year. Completing our most successful quarter to date has filled me with confidence that this year would be the most thriving in our group history. This period has highlighted our capabilities to stimulate growth and achieve robust business outcomes.

Over time, we are transformed into an organization that is not only stronger and more focused, but it's also experiencing continued growth. This evolution support our positive outlook for the future and our ongoing commitment to delivering value to all our stakeholders. This is closing CoinShares Management Q1 2024 remarks, and operator, can you now open the call for questions, please.

[Operator]

Thank you, Jean-Marie. We've got a number of questions today. The first comes from Kevin Dede from HCW. Please describe the loss on the certificate liability. What does it refer to exactly? And is a onetime loss.

[Richard Nash, executive]

Thanks, Kevin. I'll take this one. So the loss on certificate liability, no, that's not a onetime loss. That will be in the accounts every single quarter, and it represents the movement effectively on the liability owing to no holders of our products. So when we have a large loss on certificate liabilities, that effectively means the price of digital assets has increased, our AUM has increased and we effectively own more to the holders of the ETPs. And that movement will always be offset by a corresponding increase in our digital asset holdings.

[Operator]

Thank you Richard. Another one from Kevin, please offer a little more color regarding CoinShares position regarding FTX settlement. They are both suggesting that all money could be returned to investors. How likely do you see this?

[Jean-Marie Mognetti, executive]

Well, I touched upon this a little bit earlier in the presentation. Obviously, it's something we're watching with a very keen eye due to the quantum of our claim. We have, of course, been approached numerous times in the past year or so with offers to buy our claim, which we've always turned down. And I think that in and of itself provides a little bit of an indication as to what we think the final outcome will be in regards to timing and at the point in time in which we'll recognize that in our accounts, that will remain to be seen. So we're taking a prudent approach in regards to recognizing anything. And we're obviously pulling on that claim. And probably see some kind of benefit of course, this year regardless of size.

[Operator]

Thank you very much. 1 for you Jean-Marie. How does the product introduction schedule expanding beyond the current investment products look for the U.S. market and can you intend to leverage Valkyrie position?

[Jean-Marie Mognetti, executive]

Thanks, Jerry. First of all, we have already launched 2 products in Q1. So we're not short of launching product already in 2024. The product expansion is a function of the pipeline we're adding and the money we're receiving as well. We're not in the business of launching as we saw in Europe, everything and hoping for the best, we want to launch very targeted clubs in the U.S. The U.S. market is extremely competitive and has been commoditized by the launch of the Bitcoin ETF already. So we want to make sure to bring to the market stuff which are very complementary and almost [indiscernible] to what the people are doing to be able to complete and offer higher fees products to our clients.

[Operator]

And another from Kevin, what drove the decision to divest from 3iQ?

[Jean-Marie Mognetti, executive]

Not the lack of love for France for sure, we have done an extraordinary job to exit 3iQ investments from Monex. Monex made an offer for 3iQ, which is difficult to refuse. Monex paid 9x the top line pretty much. If you compare that to what CoinShares is trading at, it was difficult to say no to such an offer and also in a -- the competition happening in the U.S. was making the Canadian-specific market, less attractive to us. So we thought it was the right time to take profit. Bear in mind, the strike investment is an investment and an investment at some point is to be monetized and not just sit on the balance sheet as a dead asset. So we made a lot of money on these investments through the investment directly, but also through all the trading opportunity created for us. And we come to the conclusion of the journey, and we're still a very good friend of Fred and Fred is a happy shareholder of [indiscernible]. So we're all in one big boat.

[Operator]

Thanks very much. One last one from Kevin. Please give you of review on Q2 based on what appears to be a less volatile crypto price. Also, what has CoinShares done to develop the business, accumulate AUM at Europe and now with the Valkyrie acquisition. How are you thinking about expanding Valkyrie's brand into the U.S.

[Jean-Marie Mognetti, executive]

So -- okay. So long question from Kevin. So let's break that down step by step. So Q2, we're looking forward statements. Look, we're not really in general, giving forward-looking statement. We have the way through Q2 already. The public information are there to show you how our AUM is reporting on average or average price for assets on our balance sheet is pretty good. So we should be in the same opportunities what we've already seen before. I'm going to just not say much more on the forward-looking statements.

When it comes to Europe, [ Artem ] in Europe is doing a fantastic job to go after the blockade of liquidity which are not being addressed, which are being often of good solution and Frank and his team are -- have to work with that. When it comes to the U.S., we are devising a plan as we speak. There's a strong integration pipeline being driven on both sides of the Atlantic to make sure that the Valkyrie, what used to be called Valkyrie is becoming CoinShares and is becoming CoinShares with the same kind of rigorous principle and efforts to what we do and how we do it, and that will drive cloud acquisition and AUM acquisition as well.

[Operator]

Thank you very much. We've got a few questions from Albert Brick of ABG. The first one is, there's a significant decrease in the amount due from brokers and a new line of other current assets in the balance sheet. Is this only accounting related? Or is there a shift in strategy?

[Richard Nash, executive]

I'll say this one. It's no real shift in strategy. It's largely accounting related. Over time, our balance is due to due from brokers will fluctuate depending on movements in the market and what we're looking to do within the capital markets team. So it's not indicative of any Eigen strategy, now.

[Operator]

Another from Albert, is there any Valkyrie AUM that is off balance sheet? Is it affected by the sponsorship split that were changed in Q2?

[Richard Nash, executive]

I Can take the first half of this question. The Valkyrie AUM is all currently off balance sheet. So I think if you look at the beginning of the report, and there's a breakdown of our quarter-end AUM, which runs at approximately GBP 4.7 billion of AUM. The vast majority of that is on our balance sheet, but the assets held in respect of hedging XBT provider and collateralizing the CSDS products, the AUM in respect of the block index and the Valkyrie product is off the balance sheet.

[Operator]

Thank you very much. The next one from Albert, the large gain of FX or other in capital markets. Is this related to the hedge fund solutions? And should we consider this as a one-off or some other recurring activity?

[Jean-Marie Mognetti, executive]

First of all no, it's not in relation to the hedge fund solutions. The hedging activities undertaken within the capital markets team were designed to protect against FX fluctuations between USD and EUR and SEK. EUR and SEK being the currencies in which the BT provided ETPs are issued in. So there will always be a bit of a gain or a loss in relation to that activity in any given quarter sort of recurring in that regard. So these hedging activities are always being undertaken. I think it's fairly one-off in terms of its quantum this quarter just due to the nature of the FX moves between USD and EUR, SEK that we saw over Q1. So recurring kind of one-off and its point in this time around.

[Operator]

We've now got a number of questions from Milosz Papst. The first being, please can you provide any details on the consideration paid for the Valkyrie price?

[Jean-Marie Mognetti, executive]

Okay. I'm going to be very careful because our U.S. compliance is certainly on the call. So I'm not going to be slapped out of this call. Richard, correct me if I'm wrong. The Q4 2023 report didn't mention any strong consideration in cash going out, not being in Q1. So obviously, the cash consideration was kind of like not of very any importance, and it is driven by an announced consideration over the next 3 years but on the bottom line result of the American activity. So nothing more, nothing less. A very clean deal.

[Operator]

Another for Milosz, has there any meaningful contribution from DeFi protocols to your CSCM gains and income in Q1?

[Jean-Marie Mognetti, executive]

The short answer to that is no. The lending activities within capital markets, which manifest on the fixed income activity line, which were approximately EUR 2 million for the quarter, all represent digital asset lending to a very small number of select counterparties -- so nothing in relation to the deep DeFi protocols for Q1. We're familiar. But actually, it could be transparent. We borrow more weak on compound.

[Operator]

Thank you. Again, from Milosz, when staking Ethereum, do you use restaking solutions such as the EigenLayer?

[Jean-Marie Mognetti, executive]

So it's a very interesting question actually because average has become center of the world when it comes to work stream and staking and restaking. We had a very long meeting with the team at kill around the value proposition around restacking and notably EigenLayer. The EigenLayer proposal and a $15 billion worth of total low value is illustration that people don't really learn the lesson from the Luna accident. And as a result, CoinShares didn't touch at all EigenLayer. So risk taking is not something we are exploring right now.

We think the window are very wide -- the door is very wide open to get in. The way out is much narrower, and there is a lot of protocol risk, which is not assumed. You are just stacking up protocol risk with very little number of engineers and cryptographer able to understand what sort of cybersecurity risk around this contract. So at the moment, it's something we didn't touch, it is something we are studying something we are looking at, something we are engaging on more as a R&D story, but not at all as a production revenue contribution, I would say.

[Operator]

What impact on digital asset industry do you expect the launch of spot Bitcoin and the ETFs in Hong Kong? Should we assume it will be limited as mainland Chinese investors are unlikely to have access to these products?

[Jean-Marie Mognetti, executive]

No. So it's an interesting point. There's a lot of theory online, and people are making their own assumption on that. With my global adviser time, I spent a decent amount of time in Hong Kong and Mainland China, Lewis, which is running our hedge fund solution business used to be based in Hong Kong for 10 years and working with [ Seconti ]. So we think we have a very clear understanding of what's happening. The Hong Kong Connect activity hub, which will authorize mainland China investors to buy the ETF is effectively a grade, which is existing the bridge to be activated and require at least 6 months of trading for the product.

So right now, it's not even an option. And even if it was an option, so far, it has not been approved for the Bitcoin future banks, which obviously in Hong Kong by Samsung and not sure about the issuer, but there was a .So there was 2 issuer in Hong Kong, we issued ETF [ bak, bak ] future, which were not authorized on Trade connect. So bottom line, the new issuer of the Spot Bitcoin in Hong Kong, for the retail market on Mainland China shop. Kind of reading in the tea leaf. You may want to believe there is a bit of a story there. So far this not that I won't be indicating that, but it may well open not too far in the future, but like the indication right now is like not open.

[Operator]

And the final question then from Milosz. What is the near-term potential in terms of inflows to the U.S. Bitcoin spot ETF from a major U.S. wealth manager -- management platforms and registered investment advisers. Do you think they have already started offering the ETFs or are they still in a product due-diligence space?

[Jean-Marie Mognetti, executive]

So again, we're going touch a pinch of salt to make sure we're not making any mistake with our newly related activity in the U.S. The certain F binding, which are the kind of overview of who did what over $100 million of the in the U.S. on the product just out or about by 15 May, which was the deadline. There is some interesting names there. Interesting but also surprising there is no big name, which show that a lot of people have continuity just a lot of the warehouse in the U.S. have their own policy around launching new products and want to see some track record in the product people are adding them to the platform.

So although vast majority of the allocators and the big warehouse were still in the internal educational process -- internal approval process to make sure this going to be distributed to clients. Some of them already have it from the reverse solicitation only, which means, the client need to ask for it and place an order, and the sales team can't sell it. So we're still in a very, very early innings in the U.S. market, and I think Wisconsin Pension Fund announced that it's aware, a big shareholder in the big community or one of them at least. So the names are coming out slowly but surely, but the vast majority is you know, not touched yet.

[Operator]

Thanks very much. And that brings us to the end of our questions. Thank you, everyone, for joining today.