Coinshares International Ltd

STO:CS

Earnings Call Transcript 2024-Q3

[Operator]

Thank you for standing by, and welcome to the CoinShares Q3 Earnings Broadcast. [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.

[Jeri-Lea Brown, executive]

Thank you, operator. I would like to welcome you all to the CoinShares 2024 Q3 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 as we can within a new 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 would constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update 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. I'm very pleased to welcome you all to our Q3 2024 earnings call. Can you believe this marks our 14th quarter as a public company. Time certainly flies and crypto, it even accelerates. I can still remember the very first one Richard and I did. As always, I'd like to start by sharing my thoughts on what we have seen in the digital asset market in Q3.

Q3 was actually quite interesting, even so it might have seem quiet on the surface. Let me tell you what I mean by that. While we didn't see any major headlines, we noticed some really encouraging trends, especially in ETP flows, Bitcoin products, in particular, have been doing exceptionally well. We saw this come to a head in mid-July. That was right after Jerome Powell made his comments about getting close to that 2% inflation target.

The markets really responded to that, and we saw even more interest when the Fed announced a 50 basis point rate cuts. Now I have to mention something that caught everyone's attention to Bank of Japan move in August. While markets recovered pretty quickly, this is actually more important than it might seem at first glance.

Why? Well, it created this interesting dynamic where investors were unwinding their yen position and moving out of U.S. assets. This could push our rate higher regardless of what that does. Here's what I think is really crucial right now. It all comes down to the U.S. liquidity. Think about it. The Fed is talking about cutting rates for the first time in 4 years, that's huge and probably way too aggressive versus the speed at which you push them up, but time will say. And in my view, that's going to be some great news for both gold and Bitcoin. It is already at play in Q4.

With lower nominal rates, we are looking at real rates potentially going flat or even negative and the U.S. defining themselves out of the debt issue. I'm seeing something else that's fascinating in the market right now, the amount of assets held on digital exchanges keep going down. Now what does it tell us? It shows there is a strong demand out there, but people just aren't willing to sell. In fact, we are seeing the whales, the large holders actually increasing their positions.

What is offered is pretty inelastic, if not compressing more and more. If we show it on the domain side, in the gold market is good for a 40% move, let's just zoom out and wonder what domain shock in an algorithmic constrained 21 million coin supply does to the price of Bitcoin. 2025 is going to be very exciting, and I'm looking forward to it.

At a juncture, I normally let Richard Nash, our CFO, speak about financial. However, before we get into numbers, I just want to point out the remarkable job Richard and his team did over the year, moving us from U.K. GAAP to IFRS and now allowing us to go even further in the quality of our reporting.

In Q3 2024, we successfully changed our accounting policy for digital assets. We now record movement on digital assets at fair value through profit and loss, enhancing the transparency of our financial statements. This change enables a wide range of investors to have a better understanding of CoinShares financial performance and health. All merit goes to Richard and his team, and now we do hope that Morningstar at Al will stop reporting CoinShares with a negative earnings per share. We will, of course, track all these websites and try to make sure the financial information is reflected the right way.

On that note, it is important to point out that the remarkable work done by Perianne Boring and the team at a digital chamber, lobbying of FASB and IASB contributed to Richard and his team's success.

Finally, we have concurrently implemented Bitcoin as a treasury management instrument, demonstrating our commitment to our investment thesis. Consequently, we now rank among the selected few publicly traded company, globally that have opted to maintain Bitcoin holdings on our balance sheet.

It is a modest position for now, only 78 Bitcoin, but it is a start, and we will keep the market informed about the evolution of our treasury position. We probably see more and more companies doing this, and the very first significant milestone will be the 10th of December with Microsoft AGM, where BlackRock will need to vote in support of adding Bitcoin to Microsoft's balance sheet. If they want to remain consistent with their own CEO public stance.

Okay. So now let's dive in our Q3 financials and for that, I'm joined by Richard, our CFO. Richard, over to you.

[Richard Nash, executive]

Thanks very much, Jean-Marie. As previously reported, we started the year extremely strong with Q1 2024 posting the highest quarterly EBITDA in the group's history. Q2 was been highlighted by 2 key events being the write-down of our holding in FlowBank and the sale of our FTX claim, resulting in a net gain of approximately GBP 9 million on top of the underlying business performance.

But now moving into the second half of the year. In Q3, this has been a relatively stable quarter. We've seen yet again, solid performance from our 2 business lines, continued stability in our cost base and numerous positive internal developments, which is standing us in good stead as we look to close out the year and prepare for what looks to be an eventful 2025 for the wider industry and by extension for CoinShares itself.

Our combined revenue gains and other income for Q3 stands at GBP 25.8 million, bringing our year- to-date top line figure to GBP 78.5 million. This excludes the exceptional item of $28 million arising from the Q2 sale of the FTX claim. This figure of GBP 78.5 million is now ahead of 2023 in its entirety, and it looks to maintain its consistent pace as we move towards the end of the year.

On the cost side of things, we have seen increases when compared to 2023 due to a variety of factors. On the direct cost side, the increases are primarily driven by increased custody fees due to larger AUM held across the group.

While on the admin expense side, we have seen increases primarily due to larger bonus accruals driven by our stronger performance and increased costs following the acquisition of Valkyrie that completed at the start of the year.

EBITDA for the quarter of GBP 15.4 million remained solid and at a stronger margin than last year due to our ongoing focus on ensuring our cost increases are arising as a result of growing the group's top line performance. We're now including within this table, the group's net profit figure following a change in our accounting policy for digital assets, which is an important milestone for the group and for the communication of our financial performance. And it's worth going into this in a little bit more detail.

So historically, the group classified its digital asset holdings as intangible assets, and this classification resulted in a large movements in other comprehensive income figure for the group. And this, in turn, resulted in sometimes a significant distortion of the group's profit after tax figure on the face of the statement of comprehensive income. Following a revised assessment of the group and its activities, we're now satisfied that a change in accounting policy to classify the digital asset holdings as either inventory or assets held for hedging is now justified.

This change results in all of the fair value movements in the group's digital asset holdings to be taken through profit and loss. And this, in turn, results in a profit after tax figure that is much more representative of the performance of the group. It's also much more easily understandable by a wider range of users of the accounts. It remains presented in accordance with IFRS. And importantly, it's very easily reconcilable to our actual EBITDA figure that we've always reported.

We hope that a result of this change, the data that's being picked up in the market regarding ourselves and our performance will be improved upon as we have oftentimes seen our performance and misinterpreted as a result of the accounting treatment. Further information on this topic is being included within the notes to the interim financial statements uploaded to the company website, inclusive of a restatement of the relevant prior periods under this treatment. And I'd encourage anyone who wishes to dig into this change any further to have a read of these disclosures in full.

Back to the performance of the Group itself and starting with our asset management platform. And as a reminder, the components of this business unit are the CoinShares XBT Provider ETPs, our CoinShares physical ETPs, the CoinShares Blockchain Global Equity Index or BLOCK Index and the 4 ETFs within the Valkyrie product suite.

The story within Asset Management has been consistent throughout 2024. Strong top line and continued diversification of management fees, coupled with cost control and solid margins. As can be seen from the table here, the overall gross profit margin of the Group's asset management platform remains healthy and stable. Total management fees for the quarter of GBP 19.9 million brought the year-to-date total to approximately GBP 61.8 million.

We've seen consistent quarter-on-quarter performance during the year. While we've seen outflow in XBT Provider, this has, in turn, been offset by inflows across our other product suites further bolstered by price action in digital assets. CoinShares XBT Provider fees for the quarter amounted to GBP 14.9 million compared to GBP 9.5 million for the same period in 2023.

We did see a level of outflow over the course of the quarter, but this amounted to approximately $35 million, and that's the smallest quarterly outflow we've seen thus far in 2024. We continue to see a familiar theme with CoinShares XBT Provider. Net outflow that correlates with price increases due to long-term holder-taking profit while at the same time, the underlying unique number of orders continues to grow as more people enter the product at smaller volumes than those who are redeeming.

The total AUM for CoinShares XBT Provider saw a decrease over the quarter of approximately 14.2%, from GBP 2.48 billion to closing AUM of GBP 2.14 billion.

Moving on to CoinShares Physical. So CoinShares Physical has posted its strongest quarter on record with management fees that are inclusive of revenue generated from staking of GBP 4.1 million. That compares to GBP 0.6 million for the same period in 2023, and a core driver for this performance as I've just mentioned, is the staking capabilities on the CoinShares Phsical Ethereum product, which has brought a material benefit to both CoinShares and noteholders alike.

This performance has also been aided by ongoing inflow into the product suite amounting to $77.3 million in the quarter. This positive flow has facilitated growth in overall AUM despite marginal asset price declines over Q3.

For Valkyrie, we've had fees in the quarter of GBP 488,000, bringing total management fees since the acquisition in Q1 to around about GBP 1 million. These revenue spread across the 4 ETFs within the Valkyrie Product suite have been aided by inflow in the quarter of $53.3 million. And the closing AUM across these products at the end of the quarter stands at approximately $430 million.

And finally, the BLOCK Index has generated fees at GBP 405,000 and that's been consistent over the quarter of 2024, and it continues to perform well when compared to its peers. On an overall basis, the net flow seen on the group's product suites, combined with the price movements in the quarter, resulted in a decrease in assets under management for the group from GBP 4.19 billion to GBP 3.82 billion.

As always, I'd just remind everyone that the flows for our ETP product suites and those of our key competitors are published in our weekly digital fund flow report, which is available on our website. Additionally, the level of AUM within both CoinShares XBT Provider and CoinShares Physical is disclosed on the company website and subject to daily attestation report by Ledger Lens, which is an independent firm that provided a solution that's embedded into our website, which is also designed to provide additional transparency and comfort to all of our stakeholders.

Now moving on to capital markets. The top line performance of the group's capital markets business in Q3 continues to demonstrate the benefit that diversification of activities can break. And has resulted in total other income and gains for the quarter of GBP 7.7 million, which is comparable to Q3 of last year. This performance brings the year-to-date top line figure to GBP 36.2 million compared to GBP 21.2 million for the 9-month period ended September 2023. So a good improvement there. And as a reminder, that -- this top line figure that I'm referring to here, it doesn't include the exceptional item arising from the sale of the FTX claim, which is in the region of GBP 28.8 million.

The main contributor to the performance of Capital Markets remains our e-staking activities with average yield of approximately 3.42% over Q3. This has resulted in rewards of circa GBP 5.6 million, bringing our year-to-date figure to GBP 17.6 million. We, therefore, expect our staking performance for the year to exceed our 2023 by the time we get to December.

Liquidity provisioning started the year very strong due to the high levels of flow experienced on the CoinShares XBT Provider. This decreased somewhat moving into Q2 and even more so into Q3, which typically does see a slowdown due to seasonality. The quarter resulted in total gains of GBP 0.3 million. And while, as I said, down quarter-on-quarter, it does remain ahead of the prior year, marginally where we saw GBP 200,000 in Q3.

With the price action we've already seen following the end of the quarter and activity we've seen on CoinShares XBT Provider, we do expect to see an increase in liquidity provisioning revenues as we move towards the year-end. After a strong Q2 for Delta neutral trading strategy, conditions in the market over Q2 resulted in comparably muted opportunities for the team after the market-wide deleveraging. Despite this, gains of over GBP 1.7 million are still comfortably ahead of Q3 2023 and bring the year-to-date figure to GBP 7.9 million, which is effectively double where we were at this point last year.

Our fixed income activities continued to show consistent performance. Income of GBP 1.7 million for Q3 is comparable to the same period last year. This consistency arises from the fact that our digital asset lending capacity is largely driven by our risk framework, which sets the amount and fee it regardless of digital asset prices. So we're starting to see consistent levels of lending resulting in consistent levels of digital asset interest and the fixed income top line.

Finally, it's noted that capital markets team has commenced the accumulation of a long BTC position through the daily conversion of the Eth Rewards that we're generating. And as at the end of Q3, this amounted to approximately 78 BTC, and this has since increased following quarter end, both due to price movement and additional conversions and the current position is 108 BTC. Any gains and losses on this long position will manifest as top line performance for both capital markets and for the group as a whole.

And finally, just before I hand back to Jean-Marie, we can take a look at the quarterly performance of the group since the start of 2021, which we always do to help visualize this quarter in context. What can be seen clearly is a return to stability following the Q2, which saw the 2 key events I mentioned previously, the write-down of FlowBank and the sale of the FTX claim. And we can also clearly see that we have an EBITDA that is on a trajectory to give the group, what we believe to be -- will be our second best year on record behind 2021.

I would also just like to remind everyone that the information we've touched upon here is included within the full earnings report released earlier today and our interim financial statements, inclusive of a review opinion from the group's auditors have also been uploaded to the company website.

And with that, I will now hand back over to Jean-Marie.

[Jean-Marie Mognetti, executive]

Thank you, Richard. Now let's talk about how our different business lines are doing. I'll start with asset management, because there is some exciting news there. The European market has really come back strong. European crypto ETP pulled in $400 million in net inflows. Just to put that in perspective, Q1 so barely $1 million in inflow. And in Q2, we actually had outflow of $430 million. So this is a dramatic turnaround.

I'm particularly pleased with how our Physical ETP platform performed. We brought in $80 million in net inflows, that's actually our second best quarter since we launched in 2021. Our CoinShares XBT Provider platform, which by the way, we have recently rebranded is also stabilizing nicely. Outflows have dropped to $35 million, down from $238 million in Q1 and $131 million in Q2.

One of the highlights this quarter was launching our new multi-asset index ETP with Finanzen.net. They are a major player in Germany and in the German financial media landscape. And this partnership is really opening up new opportunities for us in the retail market specifically. The product is quite innovative. It gives investors exposure to major cryptocurrency while also letting them benefit from staking rewards.

Looking at our U.S. business, we're seeing some really encouraging trends. Our Valkyrie business line just completed its fourth straight quarter since we got involved via the option exclusivity deal. They saw in Q3 2024, over $53 million in net flows. Our Bitcoin support ETF, TKR BRRR is contributing $38 million, and Bitcoin miner focus ETF, so equity TKR WGMI 4 we are going to make it, is adding another $20 million. We experienced a modest net outflow from our future-based products.

The team is building up in the U.S. as we integrate and restructure and our new CoinShares U.S. Home is at 437 Madison in Midtown New York. I am hopeful we will cross the $1 billion mark in AUM by the end of the year. Pretty amazing when we think about it. We bought this business basically by taking over its modest liability just under a year ago, restructure it whilst rebuilding the foundation to develop it in a sustainable yet cost-conscious manner.

Let me update you on our capital markets and hedge fund solution areas. MATRIX, our new algorithmic trading platform is delivering on its promises. The team has been doing fantastic work on this constantly improving it and adding new features. It's opening up all sorts of possibilities for us in terms of collaboration internally and with a foundational brick for a cloud model with a central netting engine.

In our Hedge Fund Solutions Division, we are working on something, I think this is going to be really interesting, a new equity long short form focused on crypto equities. We are building this on our experience to Blockchain Global Equity Index. I was on the road in September and with a few soft commitments for it, making a launch in Q1 realistic. Let's see, if we can close this lead.

On the principal investment front, we did see a portfolio decrease by about GBP 1.9 million, mainly because we're extending the CS2 fund's life. But it's not all about that number. We had some real wins too. Station 70 SAFE converted successfully under [indiscernible] leadership. It's a great company and a product we use for our own cryptographic seed backup. Still on the success side, GTSA just got it's status as a European Electronic Money Institution. This project is really the project of our Chairman [ Andres Newton ] trying to create a regulated environment to issue stable coin under MiCA regime.

Obtaining this license in 5 months demonstrate great execution. Before I wrap up, I want to mention again a strategic change in how we are doing our accounting. We have reclassified our digital assets and now fair value movements go through profit and loss. I know it might sound technical, but is very important. It makes our financial statements much clearer and easier to understand.

Concurrently, we have added Bitcoin as a treasury management instrument joining a small club of public listed companies having Bitcoin on the balance sheet. Looking back at this quarter, our 14th as a public company. I have to say, I'm really optimistic about where we are headed. We have the chance to welcome the team a new GC, Lisa Avellini, with a fantastic background. She contributed notably to the success of companies like Citadel or Balyasny Asset Management and she brings strength to our senior leadership, contributing with an incredible amount of legal and regulatory experience, strengthening our internal execution capacity as an investment firm. I'm looking forward to working with her.

More importantly, such a recruitment is showing that CoinShares is entering into a new phase of growth, able to attract more talents, which we're not considering crypto as a carrier option. So the future is exciting. We keep growing. We keep adapting and most importantly, we'll keep delivering results. Thank you all for the time today. We are happy to take questions now.

Operator, could you please open the line for questions.

[Jeri-Lea Brown, executive]

Okay. So we've got a few questions to start us off today. The first one is from Kevin Dede at H.C. W. Jean-Marie, can you offer some more color on what you mean exactly by taking share in the U.S. business in 2025? What type of new product are you considering offering to U.S. investors and how do you intend to differentiate CoinShares from the balance of U.S. investment options?

[Jean-Marie Mognetti, executive]

Thank you, Jeri, and welcome back Kevin, giving you the regular question answered. So the U.S. is 50% of the world AUM. So obviously, for CoinShares in the view to build a global franchise, having developed products in the U.S. is critical. That's why we acquired Valkyrie in March. And since then, we have been restructuring. The brand has just been co-branded with CoinShares and in the current of next year, Valkyrie as a brand will fully disappear to let place to CoinShares only.

2025 is really a year we'll have a team on the ground, albeit a small team. A number of products which will come to the U.S. The number of products we can launch is limited right now by the regulatory framework. [ Trem Victor ] will certainly accelerate the agenda in terms of what is available in the U.S., Harris victory probably keeping as it is right now and evolve slowly. So for us, the opportunity is to be able to build in the U.S. and deploy new products and build a differentiation into the product offering.

We have no business going toe-to-toe with BlackRock on the -- on the Bitcoin, on the ETF or [ the ETF ] we said before, we do only before [indiscernible] stacking parameter. So we want to bring stuff which are effectively complementary to what the big providers are doing. Our WGIMI or we're going to make it mining only specialized ETF has seen a good inflow for the period is closing to the $200 million of AUM mark. So there is potentiality to create $1 billion product in the U.S. for CoinShares and we're really looking at working on that.

[Jeri-Lea Brown, executive]

Another one for you from Kevin. With all the opportunities in front of CoinShares, why is paying a dividend in the best interest of shareholders when that money could be spent on developing consumer-facing brands in the largest AUM markets in the world?

[Jean-Marie Mognetti, executive]

It's a fair question and always balanced exercise to strike. In all honesty, the share price action in Sweden has been anything disappointing. The company is trading below book value right now, making it a perfect target for someone who wanted to do effectively the takeover of the company. So from a shareholder perspective, it's not exactly brilliant.

Yes, we have been extremely good at creating value as an executive committee and the people running the business. The transformation of the shareholder value or the translation of the shareholder value of our [indiscernible] creation value into shareholder value has not been done. We are trying to believe the market is efficient.

Clearly, it is not at that point in Sweden. We need to address that, and we're working on that. In the meantime, our shareholders have been loyal to CoinShares for a long, long time. Some of them have been with CoinShares before CoinShares existed. And in an environment where interest rates are paying 5%. On the Treasure -- on U.S. Treasuries, having a stock not performing is really not something we should be contemplating. So it's a way to also reward our shareholders for their patience. If the stock was adding the growth, it was supposed to have, I think the dividend will be not on the table and it'll be a more stock growth story. So with the absence of stock growth, which rewards shareholders for holding the stock, we have to do something else now. Doesn't that mean we have no appetite for growth. Doesn't mean we have no appetite for developing business.

CoinShares has not been created by a VC-backed environment. CoinShares has not been backed by private equity. CoinShares has been built by all the money he was making and the money he has made before. So it's partnership money being reinvested over the years, which become a listed company. So it's in our DNA be able to do a lot with not so much and to make sure we can make sure that ROI on every single dollar we spend is done in the right way.

So from time to time, being able to give back to our shareholders is a good sense of function. I also have all the way to access capital. I can access the debt market, the private debt market in the sink environment, I can also access our shareholder money when we need them back because it's always easier to ask for money back when you are in the habit to give some back. So net-net, Kevin, I think, it's a courageous stuff to do to be able to give some back, not meaning it will be done forever in perpetuity. But for the time being, given the current condition, it is the right thing.

[Jeri-Lea Brown, executive]

Thanks, Jean-Marie. I think you touched on this one slightly, but we have a question from one of our investors, Roy Hansen. We appreciate that CoinShares is trading at book value, and I've heard what whisperings about Bitwise buying ETC Group. Has the company been in any M&A discussions where we might be the target?

[Jean-Marie Mognetti, executive]

Yes. So -- It's not whispering. It's a fact Bitwise acquired ETC Group. It's also a fact that CoinShares was looking at buying ETC Group, but we decided not to pay a serious price for it. So we were very comfortable with the price we put out there, not comfortable with the final price, which was asked. So we passed on the opportunity and put our pens down. In terms of CoinShares being the target of M&A or M&A discussion, there have been discussion in the past, nothing material to report now. I don't think we should merit any kind of disclosure to the market at least.

[Jeri-Lea Brown, executive]

Thank you very much. We'll give you a break Jean-Marie. One for you Richard. Rasmus Jacobsson at Redeye. What level of fee income can we expect from CoinShares Physical going forward? Is 2% on AUM, a reasonable figure given its diverse income streams?

[Richard Nash, executive]

Thanks, Jeri. So as you rightly state, Rasmus within Coin, we have a wide range of products. And on those products we have the wide range of management fees or statement rewards that we receive lowest being 35 basis points on the Bitcoin product in management fees and then some of the staking products are in the high single digits percentage.

So there's a big mix there. The current percentage on kind of blended rate across all CoinShares Physical is actually, yes, it's around about 2%. It's a little bit shy of that. I think it's about 1.7%, 1.8%. And how that will develop over time is purely dependent on where we see the flows in which products gain the most AUM. But I think it's -- we'd have to see a fairly material shift in composition to move it materially in that figure. So 2% is reasonable. Our currently is below that, but I imagine we will remain there or thereabouts for the near future.

[Jeri-Lea Brown, executive]

Another one for you from Rasmus. What is the driver of your finance costs? And what you expect it to be?

[Richard Nash, executive]

Yes. So within our finance costs, actively payments may on borrowings. So the question is what are our borrowings and how does that manifest? So we obviously have our long-term loan from rail on which a small amount of interest is paid on that on a regular basis. And then the other thing is that we're going to be moving that figure around are more connected to what the capital markets trading team are doing. If we're in a position where we are drawing down larger balances from brokers to deploy into our trading activities, there'd be interest payments on that. We also have very large long USD position IB and short Euro position IB, the finance cost and income on that on those 2 elements largely offset themselves.

So the question is more about how is that going to move around overtime, it's more connected to all level of drawdowns are going to be having on broker bounces to deployment into other trading activities. So if it is going up, and you can see if you look at the balance sheet, where our amounts due to brokers as of the end of September is higher than what at the beginning of the year example, for example, that means that we're drawing down the balances deploying into trading activities to generate top line, but also paying interest on the borrower as well.

[Jeri-Lea Brown, executive]

Thanks, Richard. Jean-Marie, I know you've given us a little bit of color on your views in the U.S., but Rasmus has asked, what is your view specifically on the U.S. regulatory environment? And what Trump versus Harris win might have an effect of.

[Jean-Marie Mognetti, executive]

So we don't have result of the elections occurring today. So we've decided to make our earnings call the best day of the year. Bitcoin is running strongly in the last power in the house. I think the bookies are printing Trump as a winner as we stand after a very bumpy weekend between Trump and Harris. What's happening in the U.S. right now in terms of regulatory situation, I think -- in any case, the LCC current Chair is probably going to change. Under the Trump's victory, it will defacto change, under Harris victory, it will change or probably change comes end of term, I think, in June. So that's going to be one kind of problem potentially solved depending on who's appointing next.

If it's Trump victory, when you see Howard Lutnick as the Chair of transition committee for the Trump administration. Howard is also the banker of Tether. So you can have a bit of a view on the direction of traveling. It's public information, some I'm not disclosing anything that Cantor Fitzgerald has been for a long, long time as a kind of supporter of Tether in the U.S. specifically. So that's kind of giving you a good flavor of how the Trump administration can move quickly and fast on the crypto regulatory framework.

A lot of money has been put by the crypto community into different lobbying campaign, especially behind Trump. So Trump victory would definitely be a valid argument or the crypto narrative now, as usual that is what is being said and what is being done.

At CoinShares we used to do and would like to do what we say and say what we do. It's not exactly the same critics as we know. So if 25% of what is planned is executed, it will be a fantastic result compared to what we have now. So let's see how it goes.

On the Harris victory, it's probably going to be same as what we have right now. With some probably forced improvement over the time, but nothing really transformative.

[Jeri-Lea Brown, executive]

Next question is also for you, from Rasmus. Have you considered launching a [indiscernible].

[Jean-Marie Mognetti, executive]

That's a very interesting question and a question which would make our Chairman smile, alot. Turning off -- one-off CoinShares investee company called Gold Token SA, which was a joint venture between MKS [indiscernible] family and CoinShares as effectively -- as one of the first company to create a stable coin or stable gold coin in Switzerland on the FINMA ruling, has recently obtained an EMI license in Malta, an EMI license in electronic money institution license, which is basically the next -- the smaller version of what the bank license is. So it's not as strict as a bank, but it's pretty much to there reference. That whats the regulators used to operate in Europe for a long, long time before becoming a bank.

And that's the regulatory framework you require on the MiCA to be able to operate the stable coin business and issue a stable coin business and issue a stable coin business in Europe. As a result of the changes have delisted a lot of stable coin end of the regulatory framework being implemented. And this company called Stable Mint, part of Gold Token SA getting this license is offering us the possibility to issue effectively -- offering this company the possibility to issue a stable coin. There is a stable coin in the process of being developed on U.S. dollar and euro. CoinShares sell in first 5 million of Stable Mint as of last week. And there is approval that are active on Uniswap. So it's very much starting process. And something we are following very closely. And CoinShares asking, CoinShares had an option to acquire a significant of Stable Mint, so should it become successful at a very low valuation for its seed program.

[Jeri-Lea Brown, executive]

Thank you very much. Another one from Rasmus. Can you remind us what the performance we should expect from CSCM in a steady increase, steady decrease silos market and also in a volatile market?

[Jean-Marie Mognetti, executive]

I can hear, you want to receive. The performance of CSCM is a function of volatility. It's a function of access to credit line and private lender we have too. So it's kind of a portion of these 2 things and then a portion of term structure as well, you can have market volatility and long-term structure. So net-net, it's not that simple to forecast unfortunately, and we need to look back at previous results to see depending on what volatility region we are to be able to make some prognostic on what kind of forward-looking revenue can be. So that's -- as a good answer I can give you about I think next sale moderate product range.

[Jeri-Lea Brown, executive]

Thanks, Jean. Another one for you. Sorry about this. You trade very close to net current assets. Do you have a plan to reinitiate a buyback program?

[Jean-Marie Mognetti, executive]

Trading very close to net current set as a listed company is basically a curse. And yes, we are very aware of that. It's either the market, don't recognize our balance sheet and all the market don't recognize our business. So I'm not really sure which one I prefer. In any case, it is unsatisfactory answer. The buyback program is something we had in the past, that's something we stopped doing because the requirement of the NASDAQ main market also stringent that we went down to buying 10,000 shares a day at best of 5,000 shares a day at best.

So basically, not moving the needle in way shape or form and not doing anything to be able also to support the price action. So not really a big interest. However, the buyback program, not in the buyback from terminology, but it's still available for the company to effectively buy back or is there something to buy option from employees who are wishing to or willing to exercise their options. So it is a path for liquidity and something we may put time to time when we see a good entry price to the company to get the share back or this option back rather than putting that into the market.

[Jeri-Lea Brown, executive]

Another one from Rasmus. What do you think Bitwise entry into Europe might mean for ETP competition in Europe?

[Jean-Marie Mognetti, executive]

Rasmus, as I think the CEO of Bitcoin on the call, so you may ask him directly the question. But what does it mean to Europe? A lot of people came to Europe and failed. So we're wishing them absolutely good luck in Europe.

[Jeri-Lea Brown, executive]

A number of profile over to you now, Rich, we've got a question from Kevin Dede from HCW again. Please could you explain how the fully diluted EPS was 20p on GBP 935,000 in comprehensive income and was the GBP 13.2 million other comprehensive income adjusted not to include -- Sorry.

[Jean-Marie Mognetti, executive]

It's a question or riddle?

[Richard Nash, executive]

I think I get Kevin is asking. He's asking as to why the earnings per share is not calculated off total comprehensive income. It's quite calculated of our net profit figure. That is the way earnings per share is calculated. The figure going through other comprehensive income of the $13.2 million relates to our FX loss on consolidation, when we consolidate CoinShares Capital Markets into the wider Group.

We previously -- and this kind of -- this is connected to our change in accounting policy. Now our movements through other comprehensive income used to be very, very large indeed because they take into account the digital asset price movements. So in order to get an EPS that was reflective of the performance, we actually used to present an adjusted EPS, which was calculated of total comprehensive income. One of the many things that's been fixed by the change in accounting policy is the lack of requirement to do so in order to arrive at a correct EPS figure that's representative of the very performance. So the EPS is calculated as it should be under IFRS of the profit after tax figure and we no longer have the need to adjust it.

[Jeri-Lea Brown, executive]

Thank you on the question. Another one from Kevin has the trend in SBT provided asset reduction helped pace to your expectations? And how do you see that trend continuing going forward?

[Jean-Marie Mognetti, executive]

I can take it, Richard can continue. If anything, we saw it slowing down. It is slowing down in line with our expectation. And we are hopeful that the launch of new products in the new year will help support SBT provider. It is critical franchise for the Swedish market. It is a very recognized franchise in the Swedish market, and we want to keep it alive as long as possible and keep supporting it as long as possible. So not something we are forgetting. Something we are giving a lot of attention to.

[Jeri-Lea Brown, executive]

Thank you very much. Rich, another for you from one of our employees, Julien Busnel. Can you explain a little bit about what happened on the currency translation representing a loss in terms of net results, please?

[Richard Nash, executive]

[indiscernible] Actually, I briefly touched upon this in Kevin's question on EPS, actually. So in regards to what that item is, because we are -- we have a functional presentation currency of GBP but the largest entity within the group, CoinShares Capital Markets has a functional presentation currency of U.S. dollars. And that's where the vast majority of the balance sheet of the group comes from on a consolidated basis over any given period of time, the FX moves between GBP and USD are going to result in either a gain or a loss from an accounting perspective. The goods or other comprehensive income. This is an accounting entry that is indicative of a loss or it doesn't impact our results.

It doesn't impact our retained earnings or distributable reserves. So you in time really have big FX moves between GBP and USD, you'll see that movement going through other comprehensive income. Now one of the things that we're very cognizant of is the fact that, that does move a lot. And in addition, the group is growing and that with balance sheet. CSCM is growing and a wider group is growing. So this is a problem -- not probably the problem, but it's a nuance that will keep arising until such a point in time as we change our functional and presentation currency of the wider group to USD, which is something that we are currently looking at and hoping to implement moving into next year.

[Jeri-Lea Brown, executive]

Thanks very much, Jean-Marie, I think you mentioned a little bit on this, but we have a question from Albert at ABG. CoinShares have taken a net long position in Bitcoin. I was wondering about your reasoning to taking a net long position. Is it mainly related to you being bullish? And why is it not a principal investment rather than a position held at capital markets.

[Jean-Marie Mognetti, executive]

It's for the compliance department of every bank to stock banking CoinShare. Now we all took apart, it's something we are doing as a way to kind of lead by what we're preaching. We actually wanted to do it for a long time. It's something we were not adding to the noise because of the accounting treatment, which was like not reflecting that properly in a way which was clear enough to our liking, so there was no noise in the accounting treatment. So we didn't do it earlier. The fact that it was now done, give us opportunity to also do it at the same time.

There is today 41 listed company in the world, having Bitcoin as the balance sheet as a treasury asset. We do believe it's a healthy treasury assets for any company. It's a little bit doubling down in our case because CoinShares has a lot of revenue linked to effectively the price of Bitcoin already, but just having dollars was not just enough. So it's a conviction trade. We'll keep adding to it eventually and be able to report in a transparent manner to the market on a quarterly basis.

[Richard Nash, executive]

Then I'll just -- the second half of that question was just as to why not be in principal investments, but it's going to be in a position in capital markets. So the digital asset investments within principal investments have tended to be very early-stage holdings. And quite often, they are subject to a lockup period. And as and when they become liquid, we slowly start to move them out of the digital assets into the principal investments and then move them into capital markets because that's the team that will be making decisions or go the trading of those assets and the disposal there as well.

So the digital -- digital asset investment portfolio, we currently have investments that's going to get smaller over time, not necessarily because we're disposing of them, but because they're moving across the capital markets. And obviously, given our Bitcoin position that we're taking up is obviously completely liquid and it's under control of the Capital Markets team. That's where it will be housed.

[Jeri-Lea Brown, executive]

Thanks very much both. Jean-Marie, another one from Albert at ABG. Where can we anticipate effects from the implementation of the MATRIX platform. For example, will it result in increased earnings from Delta neutral trading or best performance in the hedge fund solutions?

[Jean-Marie Mognetti, executive]

I think, first of all, it's going to allow us to structure it to go back to trade 24/7. We have been like during the migration slowing down the trading to not be call it 24/7. We don't have an agent desk. We don't have a U.S. desk. So everything has always been traded at CoinShares from Europe. In the past, we were able to trade 24/7 with the redeployment of the new system, we stopped for a while. So we're going back to a much wider training hours, which will give us more opportunity in the market by just multiplying the time by 2 in the market. So that's the first step.

The second point is like a platform become a multi-tenant platform. So you could in theory find an extraordinary good quant in one of our competitor and offer them to effectively send signals in the system to create the product or to create a strategy for the Capital Market Day. So you have like a multiple ways to use it to leverage it. And we will be able to share more about that once we start to become more concrete.

[Jeri-Lea Brown, executive]

Thank you very much. And another one for you, Richard, Alba asks, are the digital assets registered as inventory if they're used to hedge the SBT liability and registered as held for collateral if they're used for hedging for the rest of the certificate liabilities? If so, are there any other differences between the distinction that we should be aware of?

[Richard Nash, executive]

So, in short, you pretty much knocked on that, Alba, the assets held for collateral are those that are used to collateralize the CoinShares Physical product suite. They have that classification due to the reasons for which we're holding them and the limitations that we have around holding them. They are purely to collateralize the liability arising from the issue of the CoinShares physical product suite. All of the other assets, digital assets held by the group are classes inventory, and that includes those that are used to hedge liability arising from XBT Provider.

And any other digital assets we hold with a view to realize gains thereon. In terms of any differences between those 2 classifications other than that distinction, not really know all of the fair value movements on these assets go through the main body of the P&L and no longer throug other comprehensive income, as we've seen already. And in terms of the valuation approach routes, nothing has changed. So the only distinction is we are holding them for different purposes, and therefore, we need to disclose them separately on the face of the financial statements and also separately the movements thereon.

[Jeri-Lea Brown, executive]

Thank you very much. Final one to you Jean-Marie from Albert. What do you believe has driven the net inflows in the European market? And are these trends sustainable?

[Jean-Marie Mognetti, executive]

Yes. So if we look back at the year Q1 -- or Q4 last year was a very, very good quarter, on the anticipation of the U.S. listings. Q1 was a migration quarter where a lot of institutional moved back their inventory position from Europe to U.S. to benefit from bare liquidity and so on. Q2 was a transition quarter and Q3 will start up like people getting back to the market there. People getting back to the market in terms of use of positioning in front of the U.S. election.

If you look at 2012, 2016, 2020 and 2024. The U.S. election has always been a good catalyst for the price of Bitcoin a year later. The price of Bitcoin in every single last 4 cases is higher. So hopefully, just this story going to maybe not repeat but a rerun little bit here than people are anticipating that. MiCA has been a strong kind of narrative form of institution and the way it has been deployed that we saw a lot of retail getting back to the market and a lot of little stream under making a bigger river.

So as the retail market, we saw a lot of institutions and starting to do more and more due diligence and do more and more homeworks in terms of how do they allocate, what they allocate, what's the use case and the final CoinShares, either really the expert and not the supermarket in everything investable make a difference in the engagement process with us.

And finally, we can see how the brand awareness, compared to the quality of what we put out there in terms of content and research and how it is distributed to the market and to a wide audience and also the events on the ground that we're holding, whether it's in Zurich, in Lugano, in Geneva in Hamburg, in Frankfurt, in Stockholm in London, in Paris and Milan.

I think I forget no city because our Q3 roadshow, I think it didn't forget a single city is seeing bigger and bigger attendance event on event and seeing more and more people with interest of reallocation capacity. So net-net, the quality of the discussion is increasing, the quality of the audience and the quantity of the audience is increasing. And we are starting to see also new allocators coming to the market and saying, how do I express a view in this market, and you sometimes starting for an equity view and at some point migrate to a pure crypto expression to an ETC product.

So it's an interesting trail to track, which we are doing. Clearly, the demand is there. We just need to be able to capture it.

[Jeri-Lea Brown, executive]

Thank you very much. That brings us to the end of our questions. We'd like to thank everyone for joining today. And wish you all a lovely rest of the afternoon.