Thank you for standing by, and welcome to the CoinShares Q3 earnings broadcast. All participants dialing in are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. You can submit your questions via the postbox below the video on the platform. 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.
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 in to 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 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 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.
Good afternoon, everyone. I'm really 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 in 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 and what we have seen in the digital asset market in Q3. You know, Q3 was actually quite interesting, even though it might have seemed 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 cut. Now, I have to mention something that caught everyone's attention. The Bank of Japan move in August. While the market 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 U.S. rates higher, regardless of what the Fed 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 four years. That's huge and probably way too aggressive versus the speed at which it pushed them up. But time will say.
And in my view, that's going to be 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. deflating themselves out of a debt issue. I'm seeing something else that's fascinating in the market right now. The amount of assets held on digital exchanges keeps going down. Now, what does it tell us? It shows there is 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 a shock on the demand side in the gold market is good for a 40% move, let's just zoom out and wonder what a demand shock in an algorithmically constrained 21 million coins supply does to the price of Bitcoin. 2025 is going to be very exciting, and I'm looking forward to it. At that juncture, I normally let Richard Nash, our CFO, speak about financials. 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 values for profit and loss and enhancing the transparency of our financial statements.
This change enabled 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 et 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 The Digital Chamber, a 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 companies 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'll 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 into our Q3 financials, and for that, I'm joined by Richard, our CFO. Richard, over to you.
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 then highlighted by two 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 two business lines, continued stability in our cost base, and numerous positive internal developments, which are 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 GBP 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 remains 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 large movements in other comprehensive income figures 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 wide range of users and 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 as 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 misinterpreted as a result of the accounting treatment. Further information on this topic has been included within the notes to the interim financial statements uploaded to the company website, inclusive of a restatement of 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 four 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 on 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 holders taking profit, while at the same time, the underlying unique number of holders 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.
A core driver for this performance, as I've just mentioned, is the staking capabilities on the CoinShares Physical 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 revenues, spread across the four ETFs within the Valkyrie product suite, have been aided by inflow in the quarter of $53.3 million. The closing AUM across these products at the end of the quarter stands at approximately $430 million.
Finally, the BLOCK Index has generated fees of GBP 405,000, and that's been consistent over the course 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 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 reports by LedgerLens, 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 bring, and has resulted in total other income and gains for the quarter of GBP 7.7 million, which is comparable to Q3 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 nine-month period ended September 2023. So a good improvement there.
As a reminder, this top line figure that I'm referring to here 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 ETH staking activities, with an 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 that of 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.
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 year-end. After a strong Q2 for a delta-neutral trading strategy, conditions in the market over Q3 resulted in comparably muted opportunities for the team after the market widened leveraging. 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 continue 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 in fiat regardless of digital asset prices. So we're starting to see consistent levels of lending resulting in consistent levels of digital asset interest and fixed income top line. Finally, it's noted that the 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.
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 two key events I mentioned previously, the write-down of FlowBank and the sale of the FTX claim. 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.
Thank you, Richard. Now, let's talk about how our different business lines are doing. As for asset management, because there is some exciting news there. The European market has really come back strong. European crypto ETP pulled in GBP 400 million in net inflows. Just to put that in perspective, Q1 saw 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 investor 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 spot ETF, ticker BRRR, is contributing $38 million, and our Bitcoin miner focus ETF, so equity, ticker WGMI for We Are Going to Make It, is adding another $20 million. We experience some 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 billion-dollar mark in AUM by the end of the year. Pretty amazing when we think about it. We built this business basically by taking over its modest liability just under a year ago, restructuring it while rebuilding the foundation to develop it in a sustainable yet cost-conscious manner. Let me update you on our Capital Market 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 being the foundational brick for a pod model with a central netting engine. In our hedge fund solution division, we are working on something I think this is going to be really interesting: a new equity long-short fund focused on crypto equities. We are building this on our experience to Blockchain Global Equity Index. I was on the road in September, and we had 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 our portfolio decrease by about GBP 1.9 million, mainly because we extended the CS2 fund life. But it's not all about that number.
We had some real wins too. Station70 safe converted successfully under Adam Ely 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 its status as a European Electronic Money Institution. This project is really the project of our chairman, Andreas Neumann, trying to create a regulated environment to issue stablecoins under MiCA regime. Obtaining this license in five months demonstrates 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 asset, and now fair value movements go through profit and loss. I know this might sound technical, but it's 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 publicly listed companies having Bitcoin on their balance sheets. 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 had the chance to welcome into 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 strengths 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 ensures that CoinShares is entering into a new phase of growth, able to attract more talents which were not considering crypto as a carrier option. So the future is exciting.
We keep growing, we keep adapting, and most importantly, we keep delivering results. Thank you all for your time today. We are happy to take questions now. Operator, could you please open the line for questions?
Okay, so we've got a few questions to start us off today. The first one is from Kevin Dede at H.C. Wainwright. Jean-Marie, can you offer some more color on what you mean exactly by taking strides 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?
Thank you, Jeri, and welcome back, Kevin. Kevin is our regular question asker. So the U.S. is 50% of the world AUM, so obviously for CoinShares, in the view to build a global franchise, having a developed presence in the U.S. is critical.
And that's why we acquired Valkyrie in March, and since then, we've been restructuring. The brand has just been co-rebranded with CoinShares, and in the course of next year, Valkyrie as a brand will fully disappear to make place for CoinShares only. You know, 2025 is already the 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. Trump victory will certainly accelerate the agenda in terms of what is available in the U.S. Harris' victory will probably keep it as it is right now and evolve slowly. So for us, the opportunity is to be able to build in the U.S., deploy new products, and build a differentiation into the product offering.
You know, we have no business going toe-to-toe with BlackRock on a Bitcoin-only ETF or an ETH-only ETF. We said it before, we do only ETH with a staking parameter. You know, so we want to bring stuff which are effectively complementary to what the big providers are doing. Our WGMI, or We're Going to Make It, a mining-only specialized ETF, has seen a good inflow on the period. It's closing to the $200 million of the AUM mark. So there is potentiality to create a billion-dollar product in the U.S. for CoinShares, and we're really looking at working on that.
Thank you very much. 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 a consumer-facing brand in the largest AUM markets in the world?
It's a fair question and always a balanced exercise to strike. In all honesty, the share price action in Sweden has been anything but disappointing. The company is trading below book value right now, making it a perfect target for someone who wanted to do effectively a 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 as people running the business. The transformation of the shareholder value or the translation of the shareholder value, or this 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.
You know, some of them have been with CoinShares before CoinShares existed. And you know, in an environment where interest rates are paying 5% on U.S. Treasury, 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 a dividend would be not on the table and it would be more of a stock growth story. So you know, with the absence of stock growth, which rewards shareholders for holding the stock, we have to do something else now. Does that mean we have no appetite for growth? Does that mean we have no appetite for developing business? You know, CoinShares has not been created by a VC-backed environment. CoinShares has not been backed by private equity.
CoinShares has been built on the money it was making and the money it has made before. So it's partnership money being reinvested over the years, which becomes a listed company. So it's in our philosophy, it's in our DNA to be able to do a lot with not so much and to make sure we can make sure the 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 another way to access capital. I can access the debt market and the private debt market in the FIG 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 very interesting 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 to do.
Thanks, Jean-Marie. And I think you touched on this one slightly, but we have a question from one of our investors, Roy Hanson. We appreciate that CoinShares is trading at book value, and I've heard whisperings about Bitwise buying ETC Group. Has the company been in any M&A discussions where we might be the target?
Yeah, so it's not whispering. It's a fact that Bitwise acquired ETC Group. It's also a fact that CoinShares was looking at buying ETC Group, but we decided not to pay a silly 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, you know, there have been discussions in the past, nothing material to report now and nothing which would merit any kind of disclosure to the market at least.
Thank you very much. I'll give you a break. Jean-Marie, one for you.
Thank you, Jeri.
From 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?
Thanks, Jeri.
So as you rightly state, Rasmus, within CoinShares Physical, we have a wide range of products, and on those products, we have a wide range of management fees or staking rewards that we receive, the 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 of percentage. So there's a big mix there. The current percentage on a kind of blended rate across all of CoinShares Physical is actually, yeah, it's around about that 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 and which products are gaining the most AUM. But I think we'd have to see a fairly material shift in composition to move it materially away from that figure.
So 2% is reasonable. We're currently just below that, but I imagine we will remain there or thereabouts for the near future.
Thanks very much. Another one for you from Rasmus. What is the driver of your finance costs and what do you expect it to be?
So within our finance costs, obviously, you know, payments may not all come borrowing. So the question is, you know, what are our borrowings and how does that manifest? So we obviously have our long-term loan from [Rayal], on which a small amount of interest is paid on that on a regular basis. Then the other things that are going to be moving that figure around are more connected to, you know, 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, we earn interest payments on that. We also have very large long USD position IB and a short Euro SEK position IB. The finance cost and income on that, on those two elements, largely offset themselves. So if the question is more about how is that going to move around over time, it's more connected to what level of drawdowns we're going to be having on broker balances to deploy 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 it's been over the year, for example, that means that, you know, we're drawing down those balances deploying into trading activities to generate top line, but also paying interest on the borrowings as well.
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 a Trump versus Harris win might have an effect on?
So we don't have the results of the elections happening today, so we've decided to make our earnings call the best day of the year. Bitcoin is rallying strongly in the last hour and a half.
I think the bookies are pricing 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 SEC current chair is probably going to change. Under a Trump victory, it will de facto change. Under a Harris victory, it will change or probably change committee's end of term, I think in June. So that's going to be one kind of problem potentially solved depending on who is appointed next. If it's a Trump victory, when you see Howard Lutnick as the chair of the, you know, 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 a bit of information in terms of disclosing anything, but the fact that Lutnick has been for a long, long time the 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 campaigns, especially behind Trump. So a Trump victory would definitely be a valid argument for the crypto narrative. Now, as usual, there is what is being said and what is being done at CoinShares. We used to do, and we like to do what we say and say what we do. You know, it's not exactly the same in politics as we know.
So, you know, if 25% of what is planned is executed, it would 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 the same as what we have right now, with some probably forced improvement over the time, but nothing really transformative.
Thank you very much. Next question is also for you from Rasmus. Have you considered launching a stablecoin?
Absolutely. Very interesting question and a question which will make our chairman smile a lot.
Funny enough, one of CoinShares's investing companies called Gold Token S.A., which was a joint venture between MKS, Marwan Shakarchi family, and CoinShares, has effectively and was one of the first companies to create a stablecoin or stable gold coin in Switzerland under FINMA ruling, has recently obtained an EMI license in Malta, an EMI license in an electronic money institution license, which is basically the next one, the smaller version of what a bank license is. So it's not as strict as a bank, but that's pretty much up to there for reference. That was the regulator used to operate in Europe for a long, long time before becoming a bank. That's the regulatory framework you require on the MiCA to be able to operate a stablecoin business and issue a stablecoin business in Europe.
As a result, a lot of exchanges have delisted a lot of stablecoin ahead of the regulatory framework being implemented. You know, this company called Stable Mint, part of Gold Token S.A., getting this license is offering us the possibility to issue effectively, well, offering this company the possibility to issue a stablecoin. There is a stablecoin in the process of being developed on U.S. dollar and euro. CoinShares has seen the first five million of Stable Mint as of last week. There is a pool now active on Uniswap. So it's a very much starting process and something we are following very closely. CoinShares, I think, Richard, you correct me, but have an option to acquire a significant part of Stable Mint should it become successful at a very low valuation for its seed program.
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, sideways market, and also in a volatile market?
Hey, you want the recipe? Right, the performance of CSCM is a function of volatility. It's a function of the access to credit line and private lender we have too. So it's kind of a function of these two things and then a function of term structure as well. You can have market volatility and no term structure. So net net, it's not that simple to forecast, unfortunately. And you need to look back at previous results to see depending on what volatility regime we are to be able to make some prognostic on what the kind of forward-looking revenue can be. So that's as a good answer I can give without having an Excel model in front of me.
Thanks, Jan.
Another one for you. Sorry about the list. You trade very close to net current assets. Do you have a plan to reinitiate a buyback program?
Trading very close to net current asset as a listed company is basically a curse, and yeah, we are very aware of that. It's either the market doesn't recognize our balance sheet or the market doesn't recognize our business, so I'm not really sure which one I prefer. In any case, it is an unsatisfactory answer. The buyback program is something we had in the past. That's something we stopped doing because the requirements on the Nasdaq main market are so stringent that, you know, we were down to buying 10,000 shares a day at best or 5,000 shares a day at best.
So basically not moving the needle in any way, shape, or form and not doing anything to be able also to support 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 exercise to buy options from employees who are willing to exercise their options. So it is a path for liquidity and something we may do from time to time when we see a good entry price for the company to get this share back or this option back rather than putting them into the market.
Thank you very much. Another one from Rasmus. What do you think Bitwise entry into Europe might mean for ETP competition in Europe?
Rasmus, I think the CEO of Bitwise is on the call, so you may ask him directly the question.
But what does it mean to Europe? We know a lot of people came to Europe and failed, so we're wishing them absolutely good luck in Europe.
Perfect. Thank you. And I'm going to throw one over to you now, Rich. We've got a question from Kevin Dede from H.C. Wainwright again. Please, could you explain how the fully diluted EPS was 20 pence on GBP 935,000 in comprehensive income? And was the GBP 13.2 million other comprehensive income adjusted not to include? Sorry. Is the question a riddle, Jeri?
Yeah, I think, yeah, I suppose I think I get what Kevin's asking. He's asking as to why the earnings per share is not calculated off total comprehensive income. It's calculated off our net profit figure. That is the way earnings per share is calculated.
The figure going through other comprehensive income of 13.2 relates to our FX loss on consolidation when we consolidate CoinShares Capital Markets into the wider group. We previously, and this kind of is a connection to our change in accounting policy. Now, our movements throughout the comprehensive income used to be very, very large indeed because they took 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 off 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 various performance.
The EPS is calculated as it should be under IFRS off the profit after tax figure, and we no longer have the need to adjust it.
Thank you. Thank you for saving me there on the question. Sorry. Another one from Kevin. Has the trend in XBT Provider asset reduction kept pace with your expectations, and how do you see that trend continuing going forward?
I can take it, Richard. I can continue. If anything, we saw it slowing down. It is slowing down in line with our expectations. We are hopeful that the launch of a new product in the new year will help support the XBT Provider. It is a 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.
Not something we are forgetting, something we are giving a lot of attention to.
Thank you very much. Rich, we've got another one 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?
Sure. It's an unfavorable claim. Yeah, I think it's fantastic. So yeah, I actually briefly touched upon this in Kevin's question on EPS, actually. So in regards to what that item is, because we have a functional currency of GBP, but the largest entity within the group, CoinShares Capital Markets, it has a functional 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 that goes through other comprehensive income. This is an accounting entry. It isn't indicative of a loss or it doesn't impact our results. It doesn't impact our retained earnings or distributable reserves. So you will, in times where you have big FX swings 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, you know, that does move a lot. And in addition, the group is growing and therefore the balance sheet of CSCM is growing and the wider group is growing.
So this is a problem that will not be a problem, but it's a nuance that will keep arising until such a point in time as we change our functional and presentation of currency of the wider group to USD, which is something that we are currently looking at and hoping to implement moving into next year.
Thank you very much. Jeri, I think you've 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 for 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?
It is for the compliance department of every bank to start taking CoinShares.
Now, we've all joked about it's something we are doing as a way to kind of live 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 enough noise in the accounting treatment, so we didn't do it earlier. The fact that it was now done gave us the opportunity to also do it at the same time. There is today 41 listed companies in the world having Bitcoin on the balance sheet as a treasury asset. We do believe it's a healthy treasury asset for any company. It's a little bit, you know, doubling down now because CoinShares has a lot of revenue linked to effectively the price of Bitcoin already.
But you know, just having dollars was not just enough. So it's a conviction trade. You know, we'll keep adding to it eventually and be able to report in a transparent manner to the market on a quarterly basis. Then I'll just, the second half of that question, I think was just as to why it's not been in Principal Investments, but it's going to be a position within 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 and Principal Investments and move them into Capital Markets because that's the team that will be making decisions on the trading of those assets and the disposal thereon as well.
So the digital asset investment portfolio we currently have in Principal Investments is 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 the Bitcoin position that we're taking up is obviously completely liquid and it's under the control of the Capital Markets team, that's where it will be housed.
Thank you very much, both. Jeri, 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 better performance in the hedge fund solutions?
I think, first of all, it's going to allow us to start to go back to trade 24/7. And, you know, we've been like during the migration, slowing down the trading to not be covered 24/7.
We don't have an agent desk and 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, you know, a much wider trading hours, which will give us more opportunity in the market by just multiplying the time by two in the market. So that's the first step. The second point is like the platform becomes a multi-tenant platform. So you could, in theory, find an extraordinary good quant in one of our competitors and offer them to effectively send signals in the system to create a product or to create a strategy for the Capital Market there. So you have like multiple ways and forms to use it and to leverage it.
And we will be able to share more about that when stuff becomes more concrete.
Thank you very much. And another one for you, Richard. Albert asks, are digital assets registered? Are the digital assets registered as inventory if they're used to hedge the XBT 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?
So you ensure you've pretty much knocked it on the head there, Albert. The assets held for collateral are those 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're held 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, classified as inventory, that includes those that are used to hedge the liability arising from an ETP provider and any other digital assets we hold with a view to realize gains thereon. In terms of any differences between those two classifications other than that distinction, not really, no. All of the fair value movements on these assets go through the main body of the P&L and no longer through other comprehensive income, as we've seen already. In terms of, you know, the valuation approach for each of those assets, nothing's changed. The only distinction is that 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.
Perfect. Thank you very much. Final one for you, Jeri, from Albert.
What do you believe has driven the net inflows in the European market and are these trends sustainable?
Yeah, 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 institutions moved out of their inventory position from Europe to U.S. to benefit from their liquidity and so on. Q2 was a transition quarter and Q3 was kind of like people getting back to the market. People getting back to the market in terms of new stuff 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 is, you know, in every single last four cases higher.
So hopefully the story is going to maybe not repeat, but rhyme a little bit here and people are anticipating that. MiCA has been a strong kind of narrative for a lot of institutions and the way it has been deployed, like we saw a lot of retail getting back to the market and a lot of little streams making a bigger river. So that's the retail market. We saw a lot of institutions starting to do more and more due diligence and do more and more homework in terms of how do they allocate, what they allocate, what's the use case. And the fact that CoinShares is really the expert and not the supermarket in everything investable makes a difference in the engagement process with us.
Finally, you know, we can see how the brand awareness, the quality of what we put out there in terms of content and research, 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 didn't forget a single city that's in our Q3 brochure, you know, seeing bigger and bigger attendance event on event and seeing more and more people with interest of reallocation capacity. Net net the quality of the discussion is increasing, the quality of the audience and the quantity of the audience is increasing.
We are starting to see also new allocators coming to the market and saying, how do I express a view in this market? The view sometimes starts with an equity view and at some point being right to a pure crypto expression through an ETP product, so it's an interesting trade to track, which we are doing. Clearly the demand is there. We just need to be able to capture it.
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.