CoinShares International Limited

I'd now like to hand the conference over to your host, Jerry Lee 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 John-Marie Magnetti, 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 the allotted time. Lastly, our safe harbour 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 doesn't accelerate. 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. You know, Q3 was actually quite interesting. Even so, 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 their 50 basis points rate cut. Now, I have to mention something that caught everyone's attention. The Bank of Japan moved 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 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 to push 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 keep 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 domain side in the gold market is good for a 40% move, let's just zoom out and wonder what a 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 that 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 UK 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 enabled a wide range of investors to have a better understanding of CoinShare financial performance and health. All merit goes to Richard and his team, and now we do hope that Morningstar et al. will stop reporting CoinShare 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 Perion Boring and her team at the Digital Chamber, her 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 in our Q3 financial, 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 and flow bank and the sale of our FTX claim resulting in a net gain of approximately £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 25.8 million pounds, bringing our year-to-date top point figure to 78.5 million. This excludes the exceptional item of 28 million arising from the Q2 sale of the FTX claim. This figure of 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 £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 so 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 figure of 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 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 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 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 XPT provider ETPs, our CoinShares physical ETPs, the CoinShares blockchain global equity index, 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 £19.9 million brought the year-to-date total to approximately £61.8 million. We've seen consistent quarter-on-quarter performance during the year. While we've seen outflow on XPT provided, this has in turn been offset by inflows across our other product suites, further bolstered by price action and digital assets. CoinJar's XPT provider fees for the quarter amounted to $14.9 million compared to $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 CoinShare's XPT 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 CoinShare's XPT provider saw a decrease over the quarter of approximately 14.2%. from 2.48 billion pounds to closing AUM of 2.14 billion pounds. Moving on to CoinJuice Physical. So CoinJuice Physical has posted its strongest quarter on record with management fees that are inclusive of revenue generated from staking of 4.1 million pounds. That compares to 0.6 million pounds 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 physical Ethereum product, which has brought a material benefit to both CoinShares and noholders 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 488,000 pounds, bringing total management fees since the acquisition in Q1 to around about 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. 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 £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 £4.19 billion to £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 XPT provider and CoinShares physical is disclosed on the company website and subject to daily attestation reports by Ledgerlands, which is an independent firm that provided a solution that's embedded into our website, which is also designed to provide additional transparency and comforts 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 £7.7 million, which is comparable to Q3 last year. This performance brings the year-to-date top-line figure to £36.2 million compared to £21.2 for the nine-month period ended September 2023. So a good improvement there. And 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 £28.8 million. The main contributor to the performance of capital markets remains our ETH staking activities, with average yield of approximately 3.42% over Q3. This has resulted in rewards of circa 5.6 million pounds, bringing our year-to-date figure to 17.6. 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 XPT 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 0.3 million pounds. And while, as I said, down quarter on quarter, it does remain ahead of the prior year marginally, where we saw 200K in Q3. With the price action we've already seen for the end of the quarter and activity we've seen on Cointrex XPT provided, we do expect to see an increase in liquidity provisioning revenues as we move towards year end. After a strong Q2 for delta neutral trading strategies, conditions in the market over Q2 resulted in comparably muted opportunities for the team after the market-wide leveraging. Despite this, gains of over £1.7 million are still comfortably ahead of Q3 2023 and bring the year-to-date figure to £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 £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 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 is 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 two 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 our 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 line are doing. As of 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 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 current share 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 CTP 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 cryptocurrencies 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-focused ETF, so Equity, ticker WGMI4, we are going to make it, is adding another $20 million. We experienced 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 co-chair 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 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 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 is a foundational brick for a pod model with a central netting engine. In our hedge fund solution division, we are working on something I think which 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 won the run in September and with a few soft commitment 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 £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. Station 70 Safe converted successfully under Adam Illy 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 and Russ Newton trying to create a regulated environment to issue stable coins under the Mika 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 in the team a new GC, Lisa Avellini, with a fantastic background. She contributed notably to the success of companies like Citadel or Baleazni 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 keep delivering results. Thank you all for your time today. We are happy to take questions now. Operator, would you please open the live for questions?

Okay, so we've got a few questions to start us off today. The first one is from Kevin Deedy at HCW. 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 coin shares from the balance of U.S. investment options?

Thank you, Jerry, and welcome back, Kevin. Kevin is our regular question asterisk. So the U.S. is 50% of the world AUM, so obviously for Concierge, in the view to build a global franchise, having developers in the U.S. is critical, and it's why we acquired Valkyrie in March, and since then we've been restructuring. The brand has just been co-represented with Concierge, and in the current of next year, Valkyrie as a brand will fully disappear to a place to co-chair only. 2025 is the year we'll have a team on the ground, albeit a small team. A number of products which will come to the US. 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. Harry's victory will probably keep it as it is right now and evolve slowly. So for us, the option is to be able to build in the U.S., deploy a new product, 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 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. 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 AUM mark, so there is potentiality to create a billion-dollar product in the U.S. for Coinshare, 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 coin shares, 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 a business, The transformation of the shareholder value, the translation of the shareholder value, of all 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 Cochair for a long, long time. Some of them have been with Cochair before Cochair existed. and in an environment where interest rates are paying 5% on US Treasuries, adding a stock not performing is really not something we should be contemplating. So it's a way to also reward our shareholder for their patience. If the stock was adding the growth it was supposed to have, I think the dividend would be not on the table. It would be more of a stock growth story. So with the absence of stock growth, which rewards shareholder for voting 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 growth? developing business. Coinshare has not been created by a VC-backed environment. Coinshare has not been backed by private equity. Coinshare has been built based 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 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 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 giving, 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 a great thing.

Thanks, Jean-Marie. And I think you touched on this one slightly, but we have a question from one of our investors, Roy Hansen. We appreciate that CoinJazz 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. B2Y has acquired ETC Group. It's also a fact that Coonshare 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 an asset. So we passed on the opportunity and put our pens down. In terms of Coonshare being the target of M&A or M&A discussion, you know, there have been... discussion 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, Jeffrey. One for you, Richard. From Rasmus Jacobson at Red Eye. What level of fee income can we expect from coin shares physical going forward? Is 2% on AUM a reasonable figure given its diverse income streams? Thank you.

Thanks, Jerry. So as you rightly state, Rasmus, within Coin.ly, we have a wide range of products. And on those products, we have a wide range of management fees or statement rewards that we receive, lowest being 35 basis points on the Bitcoin product and management fees. And then some of the statement products are in the a high single-digit percentage. So there's a big mix there. The current percentage on a blended rate across all of CoinChain's physical is actually, yeah, it's around about 2%. It's a little bit shy on 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 gain the most AUM. But I think we'd have to see a fairly material shifting composition to move that material away from that figure. 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, payments may not all come borrowing. 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 there's a small amount of interest that's paid on that on a regular basis. And then the other things 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, that we interest payments on that. We also have very large, long USD position IV and a short euro set position IV. the finance cost and income on those two elements largely offset themselves. So the question is more about how's 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 has been after the year example, for example, that means that we're drawing down this balance and deploying it into trading activities to generate top line, but also paying interest on the borrow as well.

Thanks, Richard. John, I know you've given us a little bit of power on your views in the US, 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 decided to make our earning call the best day of the year. Bitcoin is rallying strongly into us. power and health. 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 Harris' victory, it will change or probably change come his 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. It's a Trump victory. When you see Howard Littnick as the chair of the um you know transition committee for the trump uh administration uh howard is the also the banker of tether uh so you can have a bit of a view on the direction of traveling uh it's a public information so i'm not disclosing anything that contractual 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, it is what is being said and what is being done. At Coinshare, 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 time, but nothing really transformative.

Thank you very much. Next question is also for you from Rasmus. Have you considered launching a stable void?

That's a very interesting question and a question which will make our chairman smile a lot. Funny enough, one of Coonshare's investee companies called Gold Token Essay, which was a joint venture between MKS, Marwan Takashi family, and CoinShare has effectively, and was one of the first companies to create a stable coin, a stable gold coin in Switzerland under FINMA ruling, has recently obtained an EMI license in Malta, an EMI license, an electronic money institution license, which is basically the next one, the small, the smaller version of what a bank license is, so it's not as strict as a bank, but it's pretty much up to there for reference. That's what 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 a stablecoin business and issue a stablecoin business in Europe. As a result, a lot of exchanges have delisted a lot of stablecoin, and the regulatory framework being implemented And, you know, 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 US dollar and euro. CoinShare has seen in the first 5 million of Stable Mint as of last week. And there is a pool there active on Uniswap. So it's a very much starting process and something we are following very closely. And I think Richard, you could be able to have an option to acquire a significant part of StableMate 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?

You want the recipe. The performance of CSCM is a function of volatility. It's a function of the access to credit line and private lender we have. 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 statistics on what kind of forward-looking revenue can be. So that's a good answer I can give about having an Excel model in front of me.

Thanks, Jim. 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?

Trading very close to the net current set as a listed company is basically a curse. And, yeah, we are very aware of that. It's either the market don't recognize our balance sheets or the market don't recognize our business. So I'm not really sure which one I prefer. In any case, it is an unsatisfactory situation. answer. The buyback program is something we had in the past. That's something we stopped doing because the requirements of the NASDAQ main market are so stringent that you know, we went 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 invest. 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 it in 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 is the CEO of Bitloid on the call, so you may ask him directly the question. But what does it mean to Europe? You 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 Didi from HCW again. Please, could you explain how the fully diluted EPS was 20 pence on... £935,000 in comprehensive income. Was the £13.2 million of other comprehensive income adjusted not to include Sorry.

I think I get what Kevin's asking. He's asking as to why the earnings per share is not calculated off triple 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 coin just capital markets into the wider group and we previously in this kind of visit this is connected to our our change in accounting policy now our movements through all 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. So 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 SBT provider asset reduction held pace to your expectations? And how do you see that trend continuing going forward?

I can take it, Richard, and 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 a new product in the new year will help support FixBT 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. So 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, Julian Busnell. Can you explain a little bit about what happened on the currency translation, representing a loss in terms of net results, please?

Sure. I actually briefly touched upon this in Kevin's question on EPF, actually. So in regards to what that item is, Because we have a functional and presentational currency of GBP, but the largest entity within the group, CoinChest Capital Markets, it has a functional and presentational currency of U.S. collars, 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 accountancy 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 distributed full 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 that would balance you. CSCM is growing and the wider group is growing. So this is the problem. It's not really a problem, but it's a nuance that will keep arising until such a point in time as we change our functional and presentational 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. Jeremy, I think you've mentioned a little bit on this, but we have a question from Albert at ABG. Coiners 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's for the compliance department of every bank to stop taking concierge. Now, we've all jerked apart. 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 equipment, so we didn't do it earlier. The fact that it was now done gives 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 doubling down on our case because CoinShare has a lot of Revenue linked to 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.

The second half of that question was just as to why it's... not within principal investments, but it's going to be in 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 lock-up period, and as and when they become liquid, we slowly start to move them out of the digital assets within 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 thereof as well. So the digital asset investment portfolio that 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. John 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 better performance in the hedge fund solutions?

I think, first of all, it's going to allow us to go back to trading 24-7. You know, we've been, like, During the migration, slowing down the trading to not be COVID 24-7. We don't have an agent desk and we don't have an AWS desk. So everything has always been traded at CoinShare 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 trading hours, which would give us more opportunity in the market by just multiplying the time by two. uh in the market so that's uh the first step the second point is like the platform become a multi-tenant platform so you could uh in theory um find an extraordinary good quant uh in one of our uh competitor and open them to effectively send signals in the in the system to create a product or to create a strategy for the computer market there so you have like a multiple ways in the form to use it and to leverage it and we would be able to share more about that when stuff becomes more concrete.

Thank you very much. Another one for you, Richard. Albert asks, are the digital assets registered as inventory if they're used to hedge the XPT 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?

In short, you pretty much knocked it on the head there, Albert. The assets held for collateral are those used to collateralise the CoinShare's 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 collateralise the liability arising from the issue of the CoinShare's physical product suite. all of the other assets, digital assets held by the group or class as inventory. That includes those that are used to hedge the liability arising from XPT 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. And in terms of the valuation approach for each of those assets, nothing has changed. So 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.

Thank you very much. Final one for you, Marie, 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, 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 movebacks and inventory position from Europe to U.S. to benefit from bear 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 Houston 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 the dream a little bit here, and people are anticipating that. MICA had been a strong kind of narrative for a lot of institutions, and the way it has been deployed, we saw a lot of retail getting back to the market, and a lot of little streams ended up making a bigger river. The retail market, we saw a lot of institutions starting to do more and more due diligence and do more and more homeworks in terms of how do they allocate, what do they allocate, what's the use case. And the five, unfortunately, are either really the experts 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, the capacity, 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 forget no city. That's our first report show. I think I didn't forget a single city. You know, seeing bigger and bigger attendance, event on event, and seeing more and more people with interest of relocation capacity. So that needs a 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? The view sometimes starts with an equity view and at some point being right to a pure crypto expression through an ETC product. So it's an interesting trade to track, which we are doing and 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.