coinshares.com
2023 ANNUAL REPORT
Jean-Marie Mognetti
CEO
Frank Spiteri
Head of Asset Management
Lewis Fellas
Head of Hedge Fund Solutions
Daniel Masters
Chairman
Carsten Køppen
Independent
Non-Executive Director
Johan Lundberg
Independent
Non-Executive Director
Richard Nash
Chief Financial Officer
Graeme Dickson
Group General Counsel
Board of Directors
Pierre Porthaux
Head of Quantitative R&D
Benoît Pellevoizin
Head of Marketing
& Communications
Viktor Fritzén
Independent
Non-Executive Director
Christine Rankin
Independent
Non-Executive Director
BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
Management Team
Jean-Marie Mognetti
CEO / Board Member
TABLE OF CONTENTS
01 - Message from the CEO
02 - Summary of Financial Performance
03 - CoinShares Asset Management
04 - CoinShares Capital Markets
05 - Industry & Market
06 - Corporate Governance Report
07 - Sustainability Report
08 - Audited Financial Statements
4
8
11
15
18
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45
54
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MESSAGE
FROM THE
CEO
Dear fellow shareholders,
2023 was a transformative year for CoinShares.
2023 was a transformative year for CoinShares. It was not only a pivotal moment in validating our
foundational investment thesis, it was also a testament to the maturity and acceptance of digital
assets within the institutional landscape. This was illustrated by the U.S. Securities and Exchange
Commission’s (SEC) approval of Spot Bitcoin ETFs in January 2024. This is a significant milestone for
the industry, underscoring a shift towards the institutionalisation and financialisation of Bitcoin and
digital assets. Since our inception, we have steadfastly believed in the distinctive characteristics and
benefits of digital assets which would drive their inevitable financialisation.
The last 12 months have affirmed our conviction that digital assets have the potential to be hugely
transformative for the investment landscape.
A Focused Strategy for the Future
In 2023, CoinShares delivered its second-highest performance (Adjusted EBITDA: £57.3 million)
since its creation back in 2014. This success extended well beyond the favourable market conditions,
enhanced by a strategic transformation that began in Q4 2022. This shift, highlighted in my previous
CEO Message within the 2022 Annual Report, refocused our efforts on our expertise in investment
management. Indeed, CoinShares was born out of Global Advisors, a commodity hedge fund founded
in 1998 by our Chairman Daniel Masters. In the 2022 Annual Report, I emphasised the fundamental
transition from an opportunistic approach to one driven by long-term conviction and vision. In 2023,
our team therefore transformed a multifaceted business into one with a unified, coherent market
identity and clear goal.
Our goal is to become a leading global investment company specialising in digital assets.
We will achieve this by building upon what we know to be the best digital asset beta product offering
in Europe. We are now diversifying this beta offering geographically following our expansion into the
U.S. market with the acquisition of Valkyrie Funds LLC. We are also diversifying our offering away from
pure beta exposure, adding staking features. As well as this, in Q4 we started building our audited track
record in alternative investment products.
CoinShares is now positioned and ready to thrive thanks to this clear, long-term vision that leverages
our strengths and expertise to further enhance investment product offering.
It is our responsibility to communicate this effectively not only to our clients, but also to existing or
prospective shareholders, analysts and opinion leaders in order to further raise the Group’s profile
and cement our position within the industry.
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Bridging Two Distinct Financial Worlds
Reflecting on CoinShares’ positioning within the digital asset landscape required a thoughtful pause
to consider our identity and purpose from a broader perspective. Engaging in this reflective process
with the support of our board, executive employees and future leaders has allowed me to clearly define
our role and chart a course for the coming years. To put it simply, CoinShares stands at the nexus of
two pivotal trends: the securitisation of digital assets and the tokenisation of real world assets (stocks,
bonds, real estate etc.). CoinShares converts digital assets from decentralised systems (digital) into
regulated (analogue), traditional financial instruments (ETPs, ETFs, hedge funds etc.), and bridges the
gap between two distinct financial ecosystems. CoinShares acts as a digital to analogue transformer
within the crypto industry, making the new internet of value accessible and secure for investors via its
product suite.
Our Model: Balancing Innovation with Sustainable Growth and Profitability
As stated above, our mission has never been more focused. We are aiming to become a leading global
investment company specialising in digital assets; an ambition brought to life through CoinShares’
distinct model that harmonises growth with profitability, and all steered by a risk-managed yet
pragmatic approach. This model permeates every level of our organisation, motivating everyone from
office managers to myself as CEO (and second largest shareholder of the company), to strive towards
our collective ambition, thereby enhancing shareholder value. In 2023, inspired by the strategic
insights behind the transformative journey of companies such as Danaher Corp (NYSE: DHR), we
took a significant step to codify our model. Our refined framework distinguishes us from conventional
corporate models that often emphasise intangible and undifferentiated ‘corporate values’. Instead, we
transitioned toward a robust set of guiding principles. These principles are:
• Lean Operations: Maximising operational efficiencies and impact, we strategically allocate
resources to underscore our commitment to profitability and excellence.
• Laser Focus: Ensuring meticulous alignment with our overarching strategic vision, we maintain
precision and effectiveness across all facets of our operations.
• Extreme Accountability: Instilling a culture of responsibility, we set clear, measurable objectives
and performance metrics that uphold the highest standards of excellence across the board.
• Antifragility: Embracing challenges as catalysts for growth, we nurture a resilient organisational
culture that thrives on adversity, turning potential setbacks into opportunities for advancement.
• Investor Centricity: Prioritising investor insights at the heart of our strategy, we guide our
product innovation and service delivery, ensuring we remain aligned with the evolving needs of
our clients. Furthermore, we emphasise value creation and sharing with our corporate investors,
underscoring our commitment to compete for our shareholders.
These guiding principles instil discipline and focus within our organisation, providing the blueprint for
our operating model.
TradFi assets are tokenized on
blockchain and distributed on DEXs.
Tokenisation Securitisation
Digital assets are becoming
securities through ETPs.
Co)nShares
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Strengthening European Leadership and Global Expansion
In 2023, CoinShares not only demonstrated resilience but also strategic agility, navigating the
complexities of the market to reinforce our position as a leader in the digital asset space. Our focus on
innovation, coupled with strategic acquisitions and partnerships, has expanded our product offerings
and market reach, further solidifying our leadership position.
Building on 2023’s achievements, our 2024 strategy will revolve around these four principles:
• Enhancing Our Presence in Europe
Our commitment to reinforcing our leadership across Europe remains as strong as ever. Therefore,
we aim to extend the XBT Provider product line and initiate targeted marketing campaigns to
increase market penetration. A strategic rebranding effort is underway to more closely align the
product line with the CoinShares mother brand, ensuring a cohesive and recognisable identity
across our offerings.
With CoinShares Physical, we are broadening our European footprint by entering new markets
like France and Italy, while also solidifying our position in the DACH region through enhanced
partnerships and targeted educational initiatives aimed at institutional investors. Our product
suite stands out for its innovation and accessibility, featuring competitive management fees for
our Bitcoin products, alongside our Ethereum product which offers regular, transparent staking
rewards at zero management fees. Our index products follow the same pricing principles and
further underscores our commitment to accessibility, transparency and innovation.
• Expanding Globally and Driving Value With An Innovative Offering
The strategic acquisition of Valkyrie’s U.S. ETF business marks a significant milestone in our
global expansion efforts. By entering the spot Bitcoin ETF race, our goal is to position ourselves
as a cutting-edge digital investment manager in the U.S., specialising in niche and sophisticated
products like the WGMI ETF, an actively managed Bitcoin miners index, and the BTFX, a 2x
Leveraged Bitcoin Futures ETF. The year 2024 promises to be a transformative period for
the Valkyrie business as we welcome it into the CoinShares family. Among other things, this
integration will involve a strategic rebranding to achieve uniformity across our product offerings.
With regards to the U.S. I’m frequently asked how we plan to compete with such industry
behemoths as BlackRock and Fidelity. First of all, America is the largest asset management arena
— home to 50% of global assets and 15 times bigger than the European ETF market. But our
competitive edge lies in our deep expertise in digital assets. By acquiring Valkyrie and launching
CoinShares in the U.S., we’re positioned to create advanced and sophisticated financial products
focused on digital assets. Moreover, this American platform enables the integration of active
management, which is fundamental to our identity. Looking forward, the evolution of the ETF
sector will depend on blending the sophistication of hedge funds with the accessibility provided
by regulated listed products. Our goal is to combine our dual strengths in financial product
structuring and active asset management, leveraging our comprehensive knowledge of the
digital asset sector, to redefine industry standards.
• Deploying Hedge Fund Solutions
The introduction of Hedge Fund Solutions in September 2023 has helped with our establishment
of our new foothold in the U.S. market. We know this will be a long (multi-year) process as we need
to establish a presence and an audited track record. We aim to achieve this by being the most
trusted crypto hedge fund solutions platform with a stable track record. As we move into 2024,
we’re focused on refining our operations and product offering whilst building our reputation and
welcoming our very first external LP.
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• Improving our Proprietary Trading Platform
As 2023 came to a close, we welcomed a new Head of Engineering, who was tasked with leading
our development team to continue enhancing our trading platform and asked to focus on latency,
pre- and post-trade, as well as risk management. This platform is set to significantly boost the
operational efficiency of our trading, lending and staking activities, while also elevating our risk
management capabilities. We will transition all our trading activities to this advanced platform
in 2024, promising a new era of efficiency and scalability for the Hedge Fund Solutions and
Capital Markets businesses. We are also researching and experimenting with the use of Artificial
Intelligence tools in our development and testing processes. Whilst still in its infancy, we believe
this technology will help drive efficiencies in the development and execution capabilities of the
platform and our business in general.
Commitment to Shareholder Value
Despite CoinShares’ robust performance, marked by expansion, innovative product development,
internal growth, and strong profitability (67% Adjusted EBITDA margin in 2023), our stock price has
not mirrored these achievements, particularly when looking at Bitcoin and other comparables. This
discrepancy could be attributed to the current listing location which may not yet fully appreciate
the nuances of digital assets. To address this, we are intensifying our efforts in Sweden to elevate
CoinShares’ visibility among investors. We’re witnessing a significant uptick in interest from financial
analysts. Presently, we’re engaging in discussions with leading investment banks in the Nordics to
secure analyst coverage. Furthermore, we’re expanding our visibility through participation in investor
events across Stockholm and enhancing our press relationships with key Swedish opinion leaders.
In a financial environment that has moved away from zero interest rates, the static stock price scenario
of CoinShares makes the enhancement of shareholder value even more imperative. To address
this, and upon proposal from the Chairman, the Board of Directors has approved a new dividend
policy. I want to be clear that we are not running out of growth ideas, but being the sole publicly-listed
digital asset investment company capable of distributing dividends sets us apart. This policy not only
exemplifies CoinShares’ ability for consistent growth and strategic acquisitions, but also underscores
our capability to expand globally while maintaining profit margins, which we are committed to sharing
with our shareholders overtime.
Conclusion
Building on the foundations laid in the previous year, I am confident that our refined strategy, rooted
in innovation, strategic expansion, and profitability, puts us in an exceptional place for the future. By
harnessing the financialisation of digital assets and focusing on our core strengths, CoinShares is
poised to not only meet, but exceed our ambition of becoming a preeminent investment company
specialising in digital assets. We anticipate that the impact of our efforts will be evident in tangible
financial achievements, reinforcing our dedication to delivering shareholder value.
As we navigate the evolving landscape of the digital asset industry, our resolve to move forward with
purpose and vision remains unwavering. I extend my deepest appreciation for your enduring trust and
support in CoinShares. Together, we stand on the brink of a remarkable era of growth and success.
Here’s to forging ahead into a future marked by groundbreaking achievements and shared prosperity.
Jean-Marie Mognetti, CEO of CoinShares
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SUMMARY OF FINANCIAL PERFORMANCE
Selected financial information derived from the audited consolidated financial statements of the
Group is disclosed below. The full-form audited financial statements, including notes and as prepared
under IFRS are included within section 9 of the annual report.
Please note that the Adjusted EBITDA calculation of the Group (which is disclosed below) is designed
to reflect the performance of the Group if gains on digital assets were taken through Profit and Loss
at fair value, rather than through Other Comprehensive Income, as required by accounting standards.
Adherence to the accounting standards, which classify digital assets as intangible assets, results in the
disclosure of a profit after tax figure that, in our view, does not provide an accurate view of the Group’s
performance.
The Directors therefore believe the Adjusted EBITDA calculation and the alternative performance
measures (APMs) included within are useful tools for investors when evaluating the performance of
the Group and should be viewed in conjunction with the financial statements prepared in accordance
with IFRS (a summary of which is also included below).
Adjusted EBITDA Calculation
Year ended
31 December 2023 £
Year ended
31 December 2022 £
Asset management revenue 42,954,234 50,090,889
Capital markets gains & income 39,012,987 26,066,119
Principal investments gain/(loss) 3,693,062 (4,916,495)
Consumer platform revenue - 936,684
Total revenue, gains and other income 85,660,283 72,177,197
Direct costs (7,251,466) (8,667,090)
Goodwill impairment - (5,473,525)
Exceptional items - (43,852,096)
Administrative expenses (21,141,365) (20,950,111)
Adjusted EBITDA 57,267,452 (6,765,625)
EBITDA (%) 67% n/a
Depreciation/amortisation (3,202,933) (2,882,841)
Adjusted EBIT 54,064,519 (9,648,466)
Finance expense (6,902,019) (6,330,425)
Currency translation differences (8,192,795) 19,281,832
Taxation (573,670) (368,674)
Total comprehensive income 38,396,035 2,934,267
Adjusted earnings per share
basic 0.57 0.04
diluted 0.54 0.04
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We started 2023 positively following the turbulence of 2022, and consistently reported strong Adjusted
EBITDA throughout the year. 2023 was a year of recovery and stability which has resulted in the
Group’s second-best annual performance, behind 2021. While market recovery played a large part in
this performance, the Group’s individual business units have performed well in their own right over
2023 against a backdrop of a stable cost base, which has resulted in strong margins and a material
increase in the net asset value of the Group.
The Group’s Asset Management platform generated management fees in the year of £42.9 million
(2022: £50.1 million), driven by both digital asset prices and solid net inflows seen in our CoinShares
Physical product suite. CoinShares Physical is increasingly establishing itself as a key contributor to
our Asset Management performance alongside our legacy product XBT Provider. Closing AUM for
CoinShares Physical was £571.6 million, and this now represents 19% of the Group’s total AUM of
£3.04 billion as at 31 December 2023, alongside XBT Provider and the Block Index.
The Group’s Capital Markets business unit also had a positive year, with relatively consistent
performance quarter on quarter, landing at total income and gains for the year of £39.0 million (2022:
£26.1 million). Much of the performance has come from staking, further bolstered by trading gains
from the strategies deployed. Looking at 2023 as a whole for Capital Markets, one of the Group’s key
goals at the outset of the year was to achieve greater stability within this business unit following the
exceptional losses suffered in 2022, and this goal has been more than met in 2023.
The costs of the Group have remained largely consistent in nature and quantum, both across the
year and when examined alongside prior periods. The Group’s direct costs predominantly constitute
custody fees and trading fees, while the administrative costs of the Group predominantly constitute
salary expenses, IT expenditure, rental costs, legal and professional fees. We see the relative stability of
these costs alongside increasing topline as the most obvious indicator of the scalability of the Group’s
business model.
Further details are included within the full-form audited financial statements within section 9 of the
annual report.
More details on each of the Group’s business units are covered within the relevant sections of this
Annual Report.
Historical Quarterly Performance 2021 - 2023
£34.2m
£28.6m
£26.1m
£32.1m
£18.7m
-£8.2m
£6.3m
-£23.6m
£8.4m
£12.8m
£9.9m
£26.1m
-£ 30m
-£ 20m
-£10m
£0m
£ 10 m
£20m
£ 30 m
£40m
£ 50 m
Q1 2021 Q2 2021 Q3 2021 Q4 20 21 Q1 2022 Q2 2022 Q3 2022 Q4 202 2 Q1 2023 Q2 2023 Q3 2023 Q4 20 2 3
Asset Management Platform Capital Mark ets In fr astructure Principal Investments Consumer Platform (ceased 2023) Adjusted EBITDA
Asset Management Platform Capital Markets Infrastructure Adjusted EBITDA
Principal Investments Consumer Platform (ceased 2023)
- -
- -
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As at
31 December 2023 £
As at
31 December 2022 £
Assets
Investments 44,924,207 45,011,850
Other non-current assets 17,595,540 16,814,023
Non-current assets 62,519,747 61,825,873
Digital assets 2,375,850,359 868,922,517
Trade receivables and other assets 268,334,978 179,024,105
Cash and cash equivalents 25,507,944 134,768,902
Current assets 2,669,693,281 1,182,715,524
Total assets 2,732,213,028 1,244,541,397
Liabilities
Certificate liability (2,351,475,523) (986,707,490)
Other current liabilities (110,330,883) (28,660,067)
Trade and other payables (5,612,218) (3,969,783)
Current liabilities (2,467,418,624) (1,019,337,340)
Loans (23,145,127) (21,433,967)
Lease liabilities (2,404,272) (28,980)
Non-current liabilities (25,549,399) (21,462,947)
Total liabilities (2,492,968,023) (1,040,800,287)
Net assets 239,245,005 203,741,110
Summary Balance Sheet
Year ended
31 December 2023 £
Year ended
31 December 2022 £
Revenue 43,082,721 51,336,682
Expenses (28,643,971) (32,500,042)
Net (loss)/gain on financial instruments & digital assets (494,596,254) 514,549,240
Other operating income 23,447,347 16,626,978
Operating (loss)/profit (456,710,157) 550,012,858
Exceptional costs 60,190 (31,064,551)
Gain/(loss) on investments/associates 775,186 (4,950,035)
Net finance income 3,322,004 6,586,466
(Loss)/profit before interest and income tax expense (452,552,807) 520,584,738
Income tax expense (573,670) (368,674)
Net (loss)/profit (453,126,477) 520,216,064
Other comprehensive income/(loss) 491,522,512 (517,281,797)
Total comprehensive income 38,396,035 2,934,267
Summary Statement of Comprehensive Income
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COINSHARES ASSET MANAGEMENT
2023 OVERVIEW
After an eventful 2022 for the crypto market, 2023 has been a much more positive year for crypto
investors, with the anticipation over the potential approval of a spot Bitcoin ETF in the US and the
incoming 2024 Bitcoin halving driving price appreciation, especially during the second half of the year.
Regulation has been one of the main drivers of 2023’s positive sentiment. At the meeting of G20
Finance Ministers and Central Bank Governors in October, a regulatory roadmap for crypto was
adopted which involved all the important international standard setting bodies. Regulation, not an
outright ban, is now the path forward.
Over the second half of 2023, all eyes turned to the US. In August, the Court of Appeals for the DC
circuit ordered the SEC to rescind its rejection of the Grayscale spot Bitcoin ETF proposal, putting
the SEC on the back foot and dramatically improving chances for the approval of a spot Bitcoin ETF.
Bitcoin
In price terms, coming off from the lows of Q4 2022, the closing 2023 Bitcoin price of US$42,491
marked an increase over the course of 2023 of 157%, the best performing year for Bitcoin since 2020,
signalling a potential end to the 2022 “crypto winter”.
In the wake of the overall crypto market recovery and the improving chances for the approval of a spot
Bitcoin ETF, Bitcoin’s dominant market cap significantly increased over the year, from 40% to 50%,
which is often seen as a sign of a recovering market.
Ethereum
After a successful “Merge” upgrade in 2022, Ethereum delivered another important upgrade in 2023,
with the implementation in April of the long-awaited Shanghai update that would unlock validator
withdrawals. However important and successful this milestone was, Ethereum’s on-chain activity
remained muted, signalling that the continuous bearish sentiment from 2022 outweighed the positive
developments seen on the network. This translated into an underperformance of Ethereum compared
to Bitcoin, with an increase over the year of 93%, closing at US$2,299.
Solana
Solana, on the other side, has been one of the biggest winners of 2023. After a tumultuous 2022 where
it lost more than 90% of its value, largely due to FTX’s collapse, Solana was up nearly 1,000% over 2023,
from around US$10 early 2023 to more than US$100 at the end of the year.
Against this background, European net investment into crypto ETPs was around US$968 million
largely dominated by inflows into long Bitcoin ETPs, representing around 87% of all net inflows in
Europe, followed by Solana at nearly 10%.
--
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Historical EU crypto flows
2023 ETP PERFORMANCE
Gross Flows by Issuer 2023
XBT Provider
As stated above, the closing 2023 Bitcoin price of US$42,491 marked an increase over the course of
2023 of 157%, while Ethereum marked an increase of 93%, closing at US$2,299. Net outflow during
2023 saw the number of certificates issued by XBT referencing Bitcoin and Ethereum decrease during
the year by roughly 4% and 8% respectively.
The outflow experienced has been more than off-set by price appreciation in the year, causing the
AUM associated with the certificates rising by 127% to US$2.38 billion in 2023, and a gross revenue
generated from XBT Provider totalling £39.5 million.
CoinShares Digital Securies
Outflow Inflow
$1,300M
$1,ZOOM
$1,lOOM
$1,000M
$900M
$BOOM
$700M
$600M
$500M
$400M
$300M
$ZOOM
$100M
$SM
$OM
-$100M
-$ZOOM
2015
I
ss
uer
ETC
Issuance
GmbH
21Shares
AG
Wisdom
Tree
Europe
VanEck
Invesco
Digital
Assets
Valour Structured Products
SEBA
Al
Issuer
DP.utschP
Digit;:il
AssP.ts
Global X Digilal Assets
lss
Jacobi Asset Management
Helveteq
AG
Bitpanda
XBT
Provider
$253M
$SM
2016 2017
-$4OO.OM
$81M
..
-
-$90M
2018 2019
I
I
I
I
I
$0.f) M
I
$O.OM
$O.OM
I
• 160,1
-$2OO.OM
$O.OM
$1,271M
$968M
-$170M
2020 2021 2022 2023
$2OO.OM $4OO.OM
$6OO.OM
$BOO.OM
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XBT products remain strong in their home markets with inflows broadly replacing outflows in both
bear and bull market conditions, whereas outflows from the platform continue to be dominated by
profit taking from professional and US based customers, marking a shift away from the first-of-its-
kind product to an increasing amount of local competition. Outside of its home market, XBT averages
1.5% outflows per quarter.
We credit both the loss of professional investors and the relative strength of private client investors to
three factors:
1. preference for fund size amongst private client investors;
2. strength of XBT Provider/CoinShares brand in our core markets; and
3. more immediate consideration to competitors given by professional clients.
CoinShares Physical
2023 saw the continued evolution of our physical ETP platform CoinShares Digital Securities, marked
by the launch in March of our two innovative zero management fee Crypto Index ETPs: the CoinShares
Physical Top 10 Crypto Market ETP and the CoinShares Physical Smart Contract Platform ETP. Those
index ETPs, tracking indices developed together with Compass Financial Technologies, have been
designed to offer a wide, seamless, and cost-efficient exposure to the rapidly evolving cryptocurrency
landscape.
The platform generated £2.7 million in revenues after a reduction in the fee level for CoinShares
Physical Ethereum to 0% on 1 February 2023. By year end, flows and price performance had
contributed equally to a rise in run-rate revenue to £6.3 million which will be further supported moving
into 2024 from the implementation of staking on the Ethereum product.
We remain committed to CoinShares Physical and providing both professional and retail investors
across Europe with:
• the best in investor protection;
• high liquidity;
• competitive pricing; and
• innovative product features.
CSDS offers a total of 15 products, with our 11 ‘alt-coin’ products dominating their competition in net
flows with US$32 million overall in 2023.
Block Index
Alt Coins Ex Solana 2023
CoinShares Digital Securies
Is
su
er
21Shures
AG
Wisdom
Tree
Europe
ETC
Issuance
GmbH
Deutsche
D1g1tal
Assets
Valour Structured
Products
SEBA
Al
Issuer
B1tpanda
VanEck
-$52.?SM
- $4.23M
l
$181M
I $0.30M
I $0.03M
·$0.
0lM
-$0.02M J
$32.12M
$17.13M
-$60.00M -$50.00M -$40.00M -$30.00M -$20.00M -$10.00M $0.00M $10.00M $20.00M $30.00M $40.00M
Notional Flow
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The CoinShares Blockchain Global Equity Index experienced relatively solid performance over 2023.
Q1 saw a positive uptick in underlying AUM due to a strong run in semiconductor stocks, further
helped by digital asset prices driving the pure-play stocks within the index. Additionally, the first
quarter saw net inflows of US$20.8 million, which contrasted with most competitors’ net outflows
during the period.
Q2 was slightly less positive, driven by a shift of interest towards the AI theme during this period. This
resulted in a diversion of assets from blockchain ETFs, and the Block Index experienced outflows
amounting to US$14.0 million. Nevertheless, despite this shift, the year-to-date flows at the halfway
point in the year remained positive at US$8.6 million. Importantly, we have maintained our position as
the market leader in terms of year-to-date inflows.
Q3 was impacted by the 10.9% depreciation in Bitcoin prices over the quarter, although the Index
managed to limit losses to 6.6%. Toward the end of the year, the index saw a very strong Q4, with the
ETF returning 51%, which compared with 11.4% for the MSCI World and 11.2% for the S&P 500. The
strong performance was led by the surge in the Bitcoin price, which spiked a rally in Bitcoin miners,
further impacting performance positively.
The Block Index finished 2023 with £576.1 million in assets benchmarked to its strategy, making it the
second largest product of its kind globally.
2024 OUTLOOK
2024 is set to be a landmark year for digital assets, with the recent launch of spot-based Bitcoin ETFs in
the US (potentially followed in the coming months by the approval of a US based spot Ethereum ETF),
the implementation of MiCA in Europe (the EU’s bespoke framework for the regulation of cryptoasset
service providers and stablecoins), and the 2024 Bitcoin halving event.
Private clients continue to be the primary beneficiaries of securities like our crypto ETPs, and we
believe that large amounts of latent demand for crypto investment products remain across such
investor segments, which is why we think this segment will continue to grow in Europe in 2024.
However, European regulatory clarity around both ETPs and underlying crypto assets as well as the
recent launch of Bitcoin ETFs in the US by large traditional asset managers will help a larger proportion
of professional investors access crypto markets, and are positive that professional investors can
represent a larger portion of our client base in the years to come.
Therefore, we aim at positioning CoinShares as the provider of choice in Europe for both private
and professional investors, by ensuring our platform stays innovative and competitive. It is with this
objective in mind that in early 2024 we have already reduced our management fees on our flagship
CoinShares Physical Bitcoin ETP to 0.35% (from 0.98% previously), and added a best-in-market net
staking rewards of 1.25% to our zero-fees Ethereum Physical ETP.
--
COINSHARES
2023 ANNUAL
REPORT
15 | 135
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02
03
04
05
06
07
08
COINSHARES CAPITAL MARKETS
2023 OVERVIEW
With Bitcoin starting the year at approximately US$16,000 and Ethereum at US$1,200, markets started
the year on the back foot, with suppressed investor appetite and low trading volumes. After the
collapse of a number of competing trading firms and market makers, we saw those remaining pare
back their trading activities and a corresponding reduction in orderbook depth and overall volatility.
For those that survived, operational complexity increased by virtue of the collapse of three digital asset-
friendly banks, being Silvergate, Signature and Silicon Valley Bank. The shuttering of Silvergate and
Signature had a profound impact due to the loss of the Silvergate Exchange Network and Signature’s
SIGNet, which offered close to real-time settlement of US dollars across exchanges and institutional
market participants. We successfully navigated these events without issue due to the implementation
of a revised counterparty risk framework and relationships with a diversified set of banking partners,
however, the return to being reliant upon traditional banking wires in a market that trades 24/7 laid
bare the benefits that blockchain settlements represent.
Following the events of 2022, we undertook a significant review of our risk framework and worked
closely with trusted counterparts to produce innovative solutions to mitigate the challenges presented
by a repeat FTX scenario. As a result of the work undertaken, we now have tripartite account control
agreements in place between our custodians and a number of exchanges, allowing us to retain our
digital assets at custodian, and our dollars at banks, undertaking a periodic net settlement thus
reducing the overall value of assets outstanding with counterparties at any moment in time.
This work has positioned us well as we undertake transition of the majority of our Capital Markets trading
activity into our newly created Hedge Fund Solutions division, as we listened to our investors who cited
counterparty risk as their greatest concern in the digital asset space. The interest generated in the launch
of our new products has been significant, and we welcomed our first external investors into the funds
in Q4 2023. Accordingly, as the Assets Under Management continue to grow under the Hedge Fund
Solutions division, our volumes within Capital Markets will decline accordingly over the forthcoming
year as we dial back our arbitrage trading strategies, with the funds being our primary trading focus.
Performance
£ YTD
31 December 2023
Year ended
31 December 2022
Liquidity Provisioning 1,446,479 4,451,317
Delta Neutral Trading Strategies 5,009,488 2,587,091
Fixed Income Activities 10,130,726 4,955,180
Staking 20,425,784 13,857,006
Other/FX 2,000,510 443,056
Total 39,012,987 26,293,650
Direct costs (inc. finance expense) (8,184,475) (8,525,419)
Exceptional items - (43,852,096)
Gross Profit 30,828,512 (26,083,865)
Gross profit margin 79% -100%
Administrative expenses (3,470,721) (1,774,189)
Operating Profit 27,357,791 (27,858,054)
COINSHARES
2023 ANNUAL
REPORT
16 | 135
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Given the reduced opportunity set presented by market conditions throughout the majority of 2023,
we increased our on-chain staking activity, supporting a number of coins. This has been a material
driver of returns for us and we aim to continue our efforts in this activity throughout 2024. Additionally,
we undertook a significant revamp of our Master Lending Agreement to produce what we believe
is a best-in-class document, in order to increase our lending activity within the constraints of our
enhanced risk framework. This has borne fruit for us, as the majority of our borrowing counterparties
are significant market makers in the Traditional Finance space, with well-capitalised digital asset
trading arms. As such, we saw significant demand from such entities in Q4 2023 as they sourced
inventory to prepare themselves for the Bitcoin ETF approval. Through this positioning, we are
therefore able to put otherwise dormant inventory to work when market opportunities are not as
compelling, with opportunities to lend BTC or ETH, and the option to also stake ETH on-chain, giving
us a well-diversified revenue stream.
Liquidity provisioning was materially weaker as the XBT Provider ETN holder base remained steadfast
post the FTX induced crash of 2022, and volatility reduced significantly in the summer months. This
decline was offset by an increase in our Delta Neutral Trading strategies where we saw significant
opportunities in deploying our Futures Arbitrage strategies on the Chicago Mercantile Exchange.
Volume
Our trading volumes in 2023 declined Year on Year from US$15 billion in 2022 to US$8.8 billion in 2023
as a result of the low volatility exhibited by the market until Q4 2023, when market expectations of a
Bitcoin ETF approval began to gain pace.
2023 Volume Traded US$m
$1,600m
$1,400m
$1,200m
$1,000m
$800m
$600m
$400m
$2
0
0m
$Om
I I I I I
■
ETN
■
Physical
■
Derivatives
COINSHARES
2023 ANNUAL
REPORT
17 | 135
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2024 Outlook
As communicated first in our Q3 earnings report, the Capital Markets business continues to transition
our delta neutral trading strategies to within the products offered by our Hedge Fund Solutions
business, with the funds having now welcomed external investors in Q4. Our team of technologists,
quants and traders have taken our existing, tried and tested trading strategies and deployed these
within the funds, with a number of new trading strategies and tools developed over the course of 2023
which will generate alpha into 2024.
The advent of the Bitcoin ETF approval has been a monumental development for digital assets, and
with that brings a number of new instruments and therefore arbitrage opportunities that we may
capitalise upon, as digital assets become increasingly adopted by Traditional Finance. The introduction
of new market participants will likely change hitherto market dynamics, along with the meaningful
dollar flows that the ETFs may bring. We have identified new trading opportunities into 2024 which we
will continue to refine and enhance, as we continue to develop our tech stack and benefit from the
research of our expanded quant team.
Within the capital markets business, we will continue to honour our liquidity provisioning commitments
and seek to expand our ever-broadening relationships with an increasing number of market
counterparts and venues where we can trade.
Whilst 2023 was very much a year of consolidation and significant work was undertaken on our
risk management infrastructure, we do not plan to remain idle and will continue to adapt our risk
management policies in line with an ever-changing market. Much of the work undertaken to date
has been via the introduction of Account Control Agreements between exchanges, ourselves and our
Trusted Custodians. We continue to encourage other exchanges to follow suit and will work to push for
off-exchange settlement to become the de facto method adopted by the market.
Our pipeline of lending business remains strong into 2024 and we will continue to be selective upon
who we accept as borrowers. We expect this line of business to be a material driver of profit as a
number of high-quality market makers enter the space as they straddle trading of listed ETPs/ETFs
and the underlying digital asset.
We look forward to updating you on our progress on the transition into and growth of the Hedge
Fund Solutions Business, along with the performance of our Liquidity Provisioning, Staking and Fixed
Income Activities into 2024.
--
COINSHARES
2023 ANNUAL
REPORT
18 | 135
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02
03
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05
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2024 CRYPTO MARKET OUTLOOK
The year 2024 is poised to be transformative for digital assets, with several significant developments
on the horizon. One of the most notable is the recent launch of spot-based Bitcoin ETFs in the US.
This development, a decade in the making since the initial SEC application, has opened the market to
a broader range of investors, representing a major milestone in the acceptance of digital assets. The
impact of this can already be seen from the price action thus far in 2024.
Monetary policy remains an important factor in determining Bitcoin’s value, especially as rising
interest rates lead investors to shift their focus towards competing stores of value, such as US
Treasuries. Additionally, the stability of the US Dollar is a significant consideration, due to Bitcoin’s
inverse correlation with it. With inflation rates in developed countries declining sharply, echoing the
trends seen in the aftermath of the 2009 financial crisis, expectations are growing that the US Federal
Reserve might reduce interest rates in the first half of 2024. A decision like this would likely strengthen
the appeal of fixed supply assets, including Bitcoin and gold in favour of US Treasuries.
Inflation in Developed Markets
Moreover, the US Dollar’s appeal is diminishing due to long-term geopolitical shifts and changes in
global supply chains, leading to increased use of alternative currencies and swap lines with countries
like China. Concurrently, concerns about the sustainability of US debt, underscored by downgrades
from several rating agencies and rising Credit Default Swap (CDS) costs against the risk of a US
government default, are diminishing the Dollar’s attractiveness. CDS levels, near their highest since
2011, are rising unusually during a rate hiking cycle, indicating growing investor apprehension about
the safety of US debt.
In the event of a crisis of confidence in US debt or further instability in the US banking system, Bitcoin
may see support as investors increasingly view it as a reliable asset in uncertain times.
Source: Bloomberg, CoinShares, data available as of close 03 January 2024
GDP Weighted Core CPI %
eo
r
80
70
60
~
sr
20
10~
00
10
2008
Headline
CPI
Core
CPI
- excluding lood & energy
t
2'-
2" 0
2011
2012 2013
r
2014
20•5 20•6
20•7 2018
2019 2020
2021
2022 2023
COINSHARES
2023 ANNUAL
REPORT
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Bitcoin typically exhibits a negative correlation with the US Dollar, which is understandable given its
role as an alternative store of value. However, its correlation has recently increased, a trend often seen
during periods of monetary policy shifts or market stress, when investors flock to more stable assets.
We anticipate that this pattern is temporary and expect Bitcoin to revert to trading inversely to the US
Dollar over the next 12 months.
Lastly, the recent increase in correlation between bonds and equities, excluding the COVID-19
period, is driving investors to seek effective diversification options. In this landscape, Bitcoin has
demonstrated significant potential for diversification beyond traditional asset classes, as discussed
here. This increasing recognition among investors is likely to further drive Bitcoin’s adoption and
impact its value in the upcoming year.
How Prepared Are The Miners for the Halving?
Halving events typically present challenges and uncertainties to Bitcoin miners, and just months
before the April 2024 halving, this discussion could not be more topical. Miners had a very tough end
to 2022 and beginning of 2023, with mining economics plummeting amidst a declining Bitcoin price
and an ever increasing network hashrate. Mining conditions improved slightly from January, but with
the exception of the fee-driven May peak, economics remained subdued for most of the year. With
markets turning bullish towards Bitcoin again, miners’ profitability has increased considerably, leading
to a considerable rally in their share prices, but does that mean all is well?
We draw a comparison of Bitcoin mining companies’ financials and operations between now and
before the previous halving to gauge how these names could behave post the 2024 Bitcoin halving
event. For the pre-2020 halving analysis, we have used data from miners’ March 2020 quarter filings,
while for 2023, we have used the latest set of accounts, from the September 2023 quarter.
Back in 2020, there were seven listed miners, which accounted for a hashrate of 2.9EH/s, or 3% of
the 110EH/s network hashrate as at 31 March 2020. Currently, listed miners account for a much larger
share of the hashrate, at 25%, with the legacy miners (i.e., the ones listed in 2020) having grown their
share to 12% of the total network hashrate of 395EH/s (as of September 2023).
The Bitcoin price, difficulty and machine efficiency were at very different levels back in 2020. Hence, in
order to compare the cost of production between then and now, we have taken the direct mining costs
per Bitcoin (net of power credits, when applicable) as a percentage of the prevailing Bitcoin price at
quarter close (31 March 2020 and 30 September 2023).
Most miners have been able to reduce their costs in relation to the Bitcoin price, despite the price and
hashrate headwinds, suggesting that miners have been able to operate more efficient facilities and
machines as well as better power pricing conditions.
Going into the 2024 halving, miners are much less indebted than in 2020. There are a couple of reasons
for this. Firstly, interest rates are considerably higher now, making debt capital scarcer and more
expensive, especially after the collapse of Genesis and Celsius. Loans, which at 0% interest rates already
had some hefty spreads of 10-12%, would be borderline unaffordable in the current state of the market.
Another reason, however, is the listing of several miners in the Nasdaq, where companies have access to
at-the-market (ATM) offerings in order to equity finance their capex and operations, reducing the need
for debt financing and also allowing higher leveraged players to repay their debt using equity capital.
Another stark difference between 2020 and now is the scale of operations. While until 2020,
management would talk about petahashes and operating out of containers, mining operations now
are considerably larger scale, measured in exahashes (or one thousand petahashes), and are run
out of purpose-built sites with power contracts large enough to allow grid operators to use miners
as balancing levers when grid-wide demand goes up and down, also providing additional sources of
revenue via demand response schemes. The larger scale of miners has allowed them to accumulate
considerable sums of cash and Bitcoin, providing solid cushions for when times are not as good.
--
COINSHARES
2023 ANNUAL
REPORT
20 | 135
01
02
03
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Bitcoin miners went through the 2020 halving event largely unscathed, and although economics
initially deteriorated, the price response was enough to allow miners to continue their operations. Our
analysis reveals that miners are in much better shape now than before. In addition, a series of recently
announced machine deals suggests that miners are working to improve their fleets and efficiency,
which should reduce costs even further going into the halving.
Finally, we believe that, differently to 2020, Bitcoin has two significant drivers ahead: the recent
approval of a spot Bitcoin ETF in the US and the easing of monetary policy by the Fed. Both factors are
likely to provide a considerable boost to the Bitcoin price and further contribute to clearing the halving
hurdle in a similar or better fashion as last time.
Fund Flows suggest the bull market has only just begun
The year 2024 is anticipated to mark a significant turning point in the digital asset sector, with the
expectation of substantial institutional investor participation for the first time. Over the past decade,
issuers have been engaged in a prolonged struggle with the United States Securities and Exchange
Commission (SEC) to approve a spot-based Exchange-Traded Fund (ETF) for digital assets. Issuers
have recently succeeded in launching Bitcoin spot-based ETFs, ETFs already exist in the US, they
are not spot-based products, which meet more stringent due-diligence criteria. Consequently, the
introduction of spot-based Bitcoin ETPs (Exchange-Traded Products) has been a pivotal moment for
many institutional investors, allowing them for the first time to gain exposure to Bitcoin.
Although spot-based Bitcoin ETPs are already available in Europe and have enjoyed relative popularity,
the US market, often at the forefront of technology investments, is seen as a more significant indicator
of legitimacy for the digital asset world. The launch of these products in the US represents a major
victory and a step towards shedding the reputational risks that have accompanied digital assets during
their maturation.
Appetite for digital assets dramatically improved towards the end of 2023 due to the hype surrounding
the impending SEC decision as indicated by US$2bn of inflows in the final quarter. But when these
flows are expressed as a percentage of assets under management, they have barely moved the needle,
while total AUM (Assets Under Management) at US$51bn remain well below the US$84bn peak seen
in late 2021. This suggests that if we are truly in a new bull market, it is evident that it has barely begun.
Digital Asset ETP Net Assets US$m
Source: Bloomberg, CoinShares, data available as of close 04 January 2024
log scale
50C" ~Cumulative flows
I AuM
5000
50
2017 2018 2019 2020
202•
2022 2023
COINSHARES
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REPORT
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There are concerns that the entry of US investors into the digital asset market could create
overwhelming demand, potentially straining market capacities. However, we consider this scenario to
be highly improbable. When examining the existing volumes of Bitcoin ETPs, they typically account for
an average of around 12% of the total Bitcoin trading turnover on trusted exchanges. This figure already
includes volumes from the closed-end GBTC Fund.
Bitcoin ETP Turnover as % of Total Bitcoin Turnover
In 2023, Bitcoin was the primary beneficiary of improved investor sentiment, attracting US$1.9 billion
in inflows, which constituted 87% of the total inflows into digital assets. This level of dominance in fund
inflows is unprecedented, surpassing the previous peak in 2020, when Bitcoin accounted for 80%
of inflows, and greatly exceeding the 42% share it captured in 2017. With the launch of a spot-based
Bitcoin ETF, we expect Bitcoin to maintain, if not increase in the short-term, its dominant position in
attracting investment flows.
Ethereum sentiment likely to improve in 2024
In 2023 the prevailing scepticism towards Ethereum’s capability to effectively implement changes to its
protocol coupled with the quantum of its network fees are, we believe, key factors behind its relatively
low inflow of investments. This initially stemmed from doubts surrounding the Merge in 2022, followed
by concerns about the unstaking process in the Shanghai upgrade, and now the anticipated Decun
upgrade in the first quarter of 2024. Additionally, fund flows data suggest that Ethereum faced stiff
competition from Solana, which has garnered more than double Ethereum’s inflows, at US$167 million
compared to Ethereum’s US$78 million.
Despite these challenges, the Ethereum Foundation has demonstrated a growing proficiency in
successfully rolling out major network upgrades, as evidenced by the seamless execution of both
Shanghai and The Merge. However, Ethereum seems to remain underappreciated by investors. This
lack of enthusiasm appears unwarranted, especially considering that Ethereum is the only digital asset
currently offering an attractive yield, with its net issuance being slightly negative. Furthermore, issuers
are already applying for a spot-based ETF in the US, improving sentiment and the launch of these
ETFs are likely to see Ethereum’s share of flow recover in the second half of 2024.
Source: Bloomberg, CoinShares, data available as of close 04 January 2024
80%
70'4
60%
50%
40'4
30%
20%
2,,23
COINSHARES
2023 ANNUAL
REPORT
22 | 135
01
02
03
04
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08
The Price Impact of an ETF Launch
The big question now a Bitcoin spot ETF has been launched in the US and more recently in Hong Kong,
is just how much inflows into ETFs this may prompt and what impact on price those flows may have.
There does seem to be a relationship between inflows as a percentage of AUM and change in price.
Inflows do appear to be coincident, the week the prices rise so do flows rather than one leading the other.
Ultimately, it is very difficult to ascertain just how big the potential wall of demand will be now a
spot-based ETF has been launched. We know that it effectively diversifies a portfolio and enhances
sharpe ratios, but regulatory approval and corporate acceptance are slow burn issues due to Bitcoin’s
perceived complexity. For this reason it may well take some time for corporations and funds to build
up their knowledge and confidence before they decide to invest.
2024 Regulatory Outlook
As we reflect on the regulatory landscape of 2023 and prepare for the year ahead, the finance and
cryptoassets sectors are bracing for significant shifts driven by a multitude of new regulations in a
multitude of areas.
In the past year, regulatory bodies worldwide have been active in approving and discussing a plethora
of regulatory measures aimed at enhancing market integrity, investor protection, and innovation.
With many of these regulations set to come into force in 2024, financial institutions and crypto asset
service providers face the imperative of vigilant monitoring and adaptability.
The ability to swiftly navigate regulatory changes with agility will be paramount for ensuring compliance
and capitalising on emerging opportunities. As we embark on this Annual Report Regulatory Outlook,
we delve into the implications of these regulatory developments and explore strategies to navigate the
evolving regulatory landscape.
European Union
In the forthcoming regulatory landscape of the European Union (EU), several key directives, regulations
and refits are poised to impact the asset management and investment firm sectors, particularly within
the digital assets, market infrastructures, and alternative investment funds industries.
The Markets in Cryptoassets Regulation (MiCA) is set to establish a comprehensive framework for
regulating stablecoins and cryptoassets-related services. It aims to mitigate risks associated with
market integrity, investor protection, and financial stability, fostering a transparent and safe environment
for digital asset activities within the EU. The European Banking Authority (EBA) and the European
Securities and Markets Authority (ESMA) are actively engaged in consultations regarding MiCA.
The Digital Operational Resilience Act (DORA) is expected to bolster the resilience of the financial
sector against cyber threats and operational disruptions. By imposing requirements for IT systems,
incident reporting, and cooperation among financial entities and authorities, DORA seeks to enhance
the continuity and security of market infrastructures, ensuring the uninterrupted functioning of
financial services.
The Alternative Investment Fund Managers Directive 2 (AIFMD 2) is anticipated to refine the regulatory
framework governing alternative investment fund managers (AIFMs) and alternative investment funds
(AIFs). Through enhanced supervision, risk management, and transparency measures, AIFMD 2 aims
to further safeguard investors and promote the orderly development of the alternative investment
fund industry within the EU.
--
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The EU is also advancing its Anti-Money Laundering (AML) framework with a comprehensive package
of measures. The proposed AML Package aims to strengthen the EU’s defences against money
laundering and terrorist financing by enhancing transparency, cooperation, and enforcement across
member states. Key elements include the establishment of a new EU authority for AML supervision,
harmonisation of AML rules, expanded access to beneficial ownership information, and increased
scrutiny on high-risk third countries.
The EU Commission adopted a Retail Investment Strategy (RIS) that places the consumers’ interests at
the centre of retail investing. The aim is to empower retail investors to make investment decisions that
are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected.
The impacted regulations include MiFID II (Markets in Financial Instruments Directive II), PRIIPs
Regulation (Packaged Retail Investment and Insurance Products Regulation), and potentially other
new regulatory frameworks such as MiCA and SFDR (Sustainable Finance Disclosure Regulation).
United States
Given the partisan divisions in Congress, 2023 did not see any significant crypto legislation move past
its initial stages. Similarly, since 2024 is an election year, we are not expecting any significant crypto
legislation to move forward this year.
There were however a number of significant pieces of litigation from the US which the world was
watching. In particular, the prosecution (and now sentencing) of Sam Bankman-Fried (SBF) and
the Department of Justice settlement with Binance and its CEO Changpeng Zhao (CZ) were seen as
positive steps to cleaning up crypto.
Also of note was Grayscale being successful in its litigation against the Securities and Exchange
Commission (SEC). This ultimately led to the exciting news in early January 2024 that the SEC had
approved 11 spot Bitcoin exchange traded funds. It is also a possibility that the SEC may approve a
spot ether ETF later in 2024.
United Kingdom
During 2023 the framework for the future regulation of crypto in the UK has started to take shape. The
approach of the UK is to broadly bring cryptoasset activities within the current regulatory perimeter
for existing financial services. A consultation and call for evidence on a Future Financial Services
Regulatory Regime for Cryptoassets was issued by HM Treasury in February, with a final response
document published in October 2023. During 2024 the UK Government is expected to introduce
legislation to implement these proposals.
The UK also introduced new financial promotion rules for cryptoasset firms from 8 October 2023.
These rules were designed to capture firms located in the UK, as well as firms outside the UK which
were targeting UK consumers. The Financial Services and Markets Act 2000 (Financial Promotion)
(Amendment) Order 2023 extended the financial promotions order applied to traditional financial
instruments to cryptoassets marketing.
The UK also continued to build on its existing strong cryptoasset AML/KYC framework. On 1 September
2023 the UK joined a growing list of countries which have implemented the Travel Rule - a key
recommendation from the Financial Action Task Force.
Jersey
In 2023, Jersey experienced significant levels of legislative and regulatory activity as it prepared for the
Moneyval Assessment in October 2023. The final report for the assessment is currently being drafted
and will be published after the Plenary of FATF in July 2024.
--
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As well as updating the Proceeds of Crime (Amendment No. 6) (Jersey) Order 2022 (Amendment
No. 6) coming into force in January 2023, the Government of Jersey also updated the EU Legislation
(Information Accompanying Transfer of Funds) (Jersey) Regulations 2017 (Wire Transfer Regulations)
in September 2023.
In 2024, the Government of Jersey will be releasing a National Risk Assessment of Money Laundering,
Terrorist Financing and Proliferation Financing – Virtual Asset Service Providers. This will replace the
National Risk Overview published in 2022.
The Jersey Financial Services Commission (“JFSC”) released its Business Plan for 2024 and it is, to a
large part, a continuation of the work started in 2021 with a continued focus on:
• Facilitating Business Integrity.
• Harnessing technology and influence the digitalisation of financial services.
• Developing the JFSC’s staff, systems and its capability to be a high performing organisation.
Of particular note will be the JFSC’s focus on examining conduct and prudential strategies of Regulated
firms in 2024 and the development of a digital beneficial ownership register by the Registry.
The JFSC will be focusing on Politically Exposed Persons (PEPs) for its thematic examination in Q1 and
Q2 2024 but no further information has been provided at the point of publication.
--
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CORPORATE GOVERNANCE REPORT
This Corporate Governance Report has been prepared in accordance with the Swedish Corporate
Governance Code (the “Code”).
The Board of Directors is responsible for the Corporate Governance report. The Corporate Governance
report for the financial year has been reviewed by the company’s auditor, as described in the “Auditor’s
report on the corporate governance statement”.
CoinShares International Limited is a Jersey, public limited liability company whose shares are listed
for trading on Nasdaq Stockholm. The Corporate Governance framework for CoinShares International
Limited is grounded in the Company’s Articles of Association, Companies (Jersey) Law 1991, as
amended, the Code, Nasdaq’s Nordic Main Market Rulebook for Issuers of Shares (the “Main Market
Rulebook”), and the Company’s internal rules and guidelines. The internal rules and guidelines include
primarily the Board’s rules of procedure, the CEO’s instructions and the finance manual, in addition to
a wide range of policies.
In addition, CoinShares International Limited has a number of policy documents and manuals, including
the Code of Conduct, the Corporate Governance Policy, the Insider Policy, and the Information and
Communication Policy, as well as other internal rules and recommendations that include principles
and provide guidance in the company’s operations and for its employees. The above-mentioned
governance documents are evaluated and adopted yearly by the Board of Directors. The requirements
arising from CoinShares International Limited’s shares being listed for trading on Nasdaq Stockholm
include the compulsory adoption of a corporate governance code and the company has chosen to
adhere to the Code. The guidelines of the Code are available on the Swedish Corporate Governance
Board’s website (www.bolagsstyrning.se). The Code is based on the “comply or explain” principle,
entailing that companies that apply the Code may depart from individual rules as long as they provide
an explanation for the departure. As at the date of this Corporate Governance Report, the Company
has complied with the Code.
The Group’s statutory auditor is elected by the AGM to audit the Group’s annual report and accounting
practices as well as the Board’s and CEO’s administration, and the company’s internal control
environment.
The Nomination Committee proposes resolutions ahead of the AGM regarding issues concerning
election of directors and fees and drafts a proposal for resolution that is presented to the AGM. The
AGM resolves on principals for the appointment of the Nomination Committee.
The Board establishes its committees and determines which of its members are to serve on the
respective committees. The Audit & Risk Committee and the Remuneration Committee report to the
Board of Directors.
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
EXTERNAL
AUDITOR
AUDIT & RISK
COMMITTEE
ANNUAL GENERAL
MEETING
BOARD OF
DIRECTORS
GROUP
MANAGEMENT
EXECUTIVE
COMMITTEE
OPERATING
SEGMENTS
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2023 ANNUAL
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Shareholders Shares Ownership
Daniel Masters 14,764,760 21.71%
Mognetti Partners Limited 11,876,609 17.46%
Russell Paul Newton 8,096,078 11.90%
Alan Howard 7,913,040 11.63%
Adam Levinson 3,896,618 5.73%
Paul Davidson 3,200,000 4.70%
Dwight Anderson 2,783,576 4.09%
Meltem Demirors 2,778,020 4.08%
Vitruvius Limited 2,566,213 3.77%
Horseferry Trading Pte Limited 1,550,604 2.28%
Total 10 largest shareholders 59,425,518 87.37%
Total other 8,588,253 12.63%
Total number of shares 68,013,771 100%
Number of share options in issue 3,687,944 5.14%
Total diluted share capital 71,701,715 100%
CORPORATE GOVERNANCE
The diagram above describes how corporate governance is organised. CoinShares International
Limited is a Jersey limited liability company whose shareholders ultimately decide on the company’s
governance by electing the company’s board of directors at the Annual General Meeting. The Board,
in turn, has continuing responsibility for ensuring that corporate governance of the company is in
compliance with laws and other external and internal rules and regulations.
INTERNAL GUIDELINES
The Group’s internal guidelines comprise its Articles of Association, the Board’s Rules of Procedure,
the CEO’s instructions, the financial manual, strategies and policies, and processes for internal control
and governance.
EXTERNAL GOVERNANCE INSTRUMENTS
Companies (Jersey) Law 1991, the Swedish Annual Accounts Act, the Main Market Rulebook, the
Code and other relevant laws.
SHAREHOLDERS
As of 31 December 2023, CoinShares International Limited had 3,450 shareholders. The ten largest
shareholders as of 31 December 2023 had ownership corresponding to 87.37% of the votes and share
capital. The number of unique shareholders with a holding of 5% or more in the company was five (5).
SHARE CAPITAL AND VOTING RIGHTS
According to the Articles of Association in effect at the end of the financial year, the share capital
of the company shall be no more than £99,000 divided into 200,000,000 Ordinary Shares in a single
share class. The company’s registered share capital as of 31 December 2023 was £33,666.82, divided
among 68,013,771 Ordinary Shares. The shares, which are denominated in GBP, had a share price of
£0.000495. Each share carries entitlement to 1 vote. Every person entitled to vote at general meetings
of the shareholders may vote for the full number of shares owned and represented by him or her
without restriction in voting rights.
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GENERAL MEETINGS
The general meeting is the ultimate decision-making body of the company. At the general meeting, the
shareholders exercise their voting rights on key issues, such as the adoption of income statements and
statements of financial position, appropriation of the company’s results, election of members of the
Board of Directors and auditors and remuneration to the Board of Directors and the auditors.
The annual general meeting (“AGM”) must be held within six months from the end of the financial year.
In addition to the AGM, extraordinary general meetings may be convened. As permitted under article
38. Notices of the Articles of Association, general meetings are convened by publication of the notice
convening the meeting on the company’s website and via a press release.
Notice of general meetings
According to the current Articles of Association, notice of general meetings shall be made:
• through a relevant system, where the notice or document relates to uncertificated shares;
• by giving it by electronic communication to an address for the time being notified to the Company
by the Shareholder concerned for that purpose; and
• by making it available on the Company’s website and publishing a press release.
Notice of the annual general meeting and extraordinary general meeting where an amendment of the
articles of association will be considered shall be given no earlier than six weeks and no later than four
weeks prior to the general meeting. Notice of other extraordinary general meetings shall be issued no
earlier than six weeks and no later than three weeks before the general meeting.
Right to participate in a general meeting
Those shareholders who wish to participate in a general meeting must:
1. be recorded in the share register kept by Euroclear Sweden AB on the record date, being ten
clear days prior to the general meeting; and
2. notify the Company of their intention to participate no later than on the date set out in the notice
of the general meeting.
In addition to notifying the company, shareholders whose shares are registered under a nominee
through a bank or other nominee must request that their shares be temporarily registered in their
own names in the share register ten clear days prior to the general meeting in order to be entitled to
participate in the general meeting. Shareholders should inform their nominees well in advance of the
record date. Shareholders may attend general meetings in person or by proxy.
Shareholder initiatives
Every shareholder has the right to have a matter taken up for consideration at a general meeting. A
shareholder who wishes to have a matter taken up for consideration at a general meeting must submit
a written request about such to the Board of Directors. Such a request must normally be received by
the Board not later than seven weeks prior to the general meeting in question.
Annual General Meeting – 2022 Financial Year
The Annual General Meeting (AGM) for the 2022 financial year was held on 31 May 2023 in the form of
a virtual event without the physical presence of the shareholders or their proxies.
The AGM resolved the following:
• that the consolidated statement of comprehensive income and consolidated statement of
financial position;
• to re-elect Daniel Masters, Jean-Marie Mognetti, Carsten Køppen, Johan Lundberg, Christine
Rankin and Viktor Fritzén as members of the Board;
• to re-elect Daniel Masters as the Board Chairman;
• to re-elect Baker Tilly Channel Islands Limited as the company’s auditors;
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• that the remuneration of the auditor shall be set at the discretion of the Board; and
• that the board be authorised to repurchase and transfer the Company’s own shares in accordance
with the proposal presented to the AGM.
GENERAL MEETING – 2023 FINANCIAL YEAR
CoinShares International Limited’s Annual General Meeting for the 2023 financial year will be held
virtually on 31 May 2024. Further information is provided at www.coinshares.com under the section for
Investor Relations.
NOMINATION COMMITTEE
According to the Code, companies that adhere to the Code shall appoint a nomination committee.
CoinShares International Limited’s Nomination Committee, which is made up of representatives of
the largest shareholders, has been formed in accordance with the guidelines approved by the 2021
AGM. The Nomination Committee is tasked with submitting recommendations for the Chairman
of the Board and other board members, directors’ fees and other fees for directors’ work on the
Board, the election of the auditor and the auditor’s fees, and with evaluating the Board’s work. In the
course of its work, the Nomination Committee applied Rule 4.1 of the Code as the Board’s diversity
policy. Diversity is an important factor in the Nomination Committee’s nomination work and the
Nomination Committee shall continuously strive for diversity regarding the competence, experience
and background of the Board’s members.
The Nomination Committee’s recommendations are reported in the AGM notice. CoinShares
International Limited’s Nomination Committee shall be composed of four members, of whom three
shall represent the Company’s largest shareholders, and the fourth shall be a representative of the
Board. Regardless of how the Nomination Committee members are appointed, they shall safeguard
the shareholders’ interests.
The members of the Nomination Committee are appointed in a procedure whereby the Chairman
of the Board – as soon as possible after the end of the third quarter – contacts the three largest
shareholders as at the end of August. The Chairman of the Board shall never serve as the chair of
the Nomination Committee. The composition of the Nomination Committee is publicly announced
through a press release as soon as the members have been appointed, but not later than six months
prior to the AGM.
Based on the above, the Nomination Committee ahead of the 2023 AGM was appointed and consists
of the following persons, who together represent approximately 51.07% of the number of votes and
shares in the Company as per 31 August 2023:
• Michael Carlton, appointed by Daniel Masters
• Jean-Frédéric Mognetti, appointed by Mognetti Partners Limited
• Paul Davidson, appointed by Russell Newton
• Johan Lundberg, representative of the Board
BOARD COMPOSITION AND DIRECTORS’ INDEPENDENCE
According to the Articles of Association, the Board shall be composed of three to ten members. The
Articles of Association state that the shareholders may, by Ordinary Resolution, appoint any person or
remove any Director from office. The Board is comprised of six directors, each of whom were elected
at the AGM on 31 May 2023 for the terms until the end of the 2023 AGM. Jean-Marie Mognetti, CEO, is a
member of the Board. Other CoinShares executives participate at board meetings in a reporting role on
specific matters. According to the Code, a majority of the directors shall be independent in relation to the
Group and its management, which the company meets.
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RESPONSIBILITIES AND WORK OF THE BOARD
The Board’s duties are regulated by Companies (Jersey) Law 1991, CoinShares International Limited’s
Articles of Association, other laws and statutes, and the Code. In addition, the Board’s work is regulated
by the Rules of Procedure adopted by the Board. The Rules of Procedure regulate, among other things,
the division of duties and responsibilities between the board members, the Chairman of the Board and
the CEO, and lay out routines for financial reporting by the CEO. The Board also adopts instructions for
the Board’s committees. The Board’s duties include adoption of strategies, business plans, budgets
and forecasts, interim reports, the year-end book-closing, and policies and guidelines. The Board is
also responsible for monitoring the company’s financial performance, ensuring the quality of financial
reporting and internal controls, and evaluating the business against the objectives and guidelines
established by the Board. Finally, the Board decides on substantial investments and changes in the
Group’s organisation and operations. The Chairman of the Board and CEO shall monitor the company’s
performance, and conduct preparatory work for and lead board meetings. The Chairman of the Board
is also responsible for ensuring that the board members evaluate their work every year and that they
continuously receive the information required for them to perform their work effectively. The Chairman
of the Board represents CoinShares vis-à-vis its shareholders.
During the year, the Board held 6 meetings. The Board’s work during the year was focused particularly
on the company’s strategy, including the integration of acquired operations, positioning, financing,
culture, and the company’s development and expansion.
Committees
The Board of CoinShares International Limited has established two committees – an audit & risk
committee and a remuneration committee.
Audit & Risk Committee (“ARC”)
The Audit & Risk Committee was formally established on 29 November 2021. The Audit & Risk
Committee is tasked with providing a special forum for the work with financial reporting, internal
control, risk management and auditing, and advises the Board of Directors in these areas. The
members of the Audit & Risk Committee are Carsten Køppen, Viktor Fritzén and Christine Rankin,
who is also the committee chair. The main duties of the Audit & Risk Committee is are to monitor the
Group’s financial reporting and to oversee the effectiveness of the company’s internal controls and
risk management. In addition, the Audit Committee is tasked with staying informed about the audit of
the annual report and consolidated accounts, reviewing and overseeing the auditor’s impartiality and
independence, and in this context paying particular attention to whether the auditor provides other
services to the Group than auditing services.
The Audit & Risk Committee maintains contact with the Group’s auditor in order to establish an ongoing
exchange of information and understanding between the Board and the auditor on auditing issues.
The Audit & Risk Committee held 7 meetings in 2023.
Remuneration Committee
The Remuneration Committee was formally established on 29 November 2021. The members of
the Remuneration Committee are Carsten Køppen, Johan Lundberg (appointed 31 May 2023) and
Daniel Masters, who is also the committee chair. Christine Rankin was previously a member of and
resigned from the Remuneration Committee effective 31 May 2023. The Remuneration Committee
has an advisory and a drafting function. Its main duties are to conduct preparatory work for the
Board’s decisions on matters concerning remuneration principles, remuneration and other terms
of employment for members of the Executive Management Committee, monitoring and evaluating
application of the guidelines for remuneration of senior executives approved by the AGM as well as
applicable remuneration structures and remuneration levels in CoinShares.
The Remuneration Committee held 2 meetings in 2023.
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Evaluation of the Board’s work
The Board’s work is evaluated yearly through a systematic, structured process that aims among other
things to produce constructive documentation for improvements in the Board’s own work. The evaluation
is conducted both individually and through discussions at board meetings. The evaluation aims to give
the Chairman of the Board information on how the board members perceive the Board’s effectiveness
and collective competence as well as on whether there are any needs for changes on the Board. The
Chairman of the Board informs the Nomination Committee about the results of the evaluations.
Directors’ fees
Total remuneration paid to the directors for 2023 was £325,000, including remuneration for committee
work. Please note this does not include remuneration paid to the CEO. Details on CEO remuneration
can be found in the 2023 Remuneration Report.
INTERNAL CONTROL AND RISK MANAGEMENT
Due to the nature of the industry within which the Group operates, coupled with the nature of the
services and products provided and the constantly evolving regulatory landscape, a robust control
environment is paramount in order to protect the Group’s stakeholders, ensure compliance with
regulatory requirements of the Group, and allow for accurate and timely dissemination of information
throughout the Group.
The internal Control and Risk Management Framework is focused on the areas described below:
Governance and Oversight
In 2022 CSIL adopted a Minimum Internal Control Framework (“MICF”), this allowed all CoinShares
entities to identify the current controls maintained by the group in relation to the risks identified in the
Business Risk Assessments that were drafted and adopted in July 2022. The areas covered off were –
• Strategy and Business Planning
• Governance
• Compliance and Legal
• Capital market Trading
• Products and performance Monitoring
• Investments
• HR
• Finance
• Information Technology and Information Security
• Communication
The MICF provides the Group with a formalised framework to assist with the safeguarding of assets
and to ensure that the strategic objectives of the group are set in such a way as to be fully cognisant of
any associated risks and the requisite control resourcing being in place.
Roles and Responsibilities
To support the Board the composition, reporting and timetabling of meetings for the Audit and
Risk Committee (“ARC”), Risk and Compliance Committee (“RRC”) and Operations Management
Committee (“OMC”) have been reviewed and adjusted as appropriate. Key discussions from the RRC
and OMC are shared regularly with the ARC. Throughout the year the rollout of a new Risk Management
platform has progressed to move the Business Risk Assessments into a centralised resource.
Risk identification and Assessment
With the adoption of the new centralised resource to manage the MICF and BRAs for the group this has
augmented the systemic approach to risk management within the group. It allows for annual updates to
the risk assessments and framework, notwithstanding that each document is a ‘living document’ that is
also updated due to applicable trigger events. The assessment of risks follows the standard process of
identifying risks that are inherent, the controls are then assessed and the residual risk is then recorded.
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Reporting and Communication
As noted above reporting on risks is a key element of committee reporting up to the applicable
CoinShares Boards.
Mitigation Strategies
The Group has a variety of systems and controls in place that allow for the ongoing monitoring of all of
its digital asset holdings and positions with each of its counterparties. Internal reports are generated
automatically every 10 minutes (increased to every minute during periods of significant volatility) and
provided to the relevant members of CoinShares Asset Management and CoinShares Capital Markets
responsible for hedging and trading activities of the Group.
All counterparties with which the Group interacts for the purpose of either digital assets storage
or trading are subject to robust due diligence procedures and are integrated fully with the Group’s
internal systems prior to engaging in any kind of active relationship.
The counterparty risk of the Group is further mitigated by the fact that the majority of the Group’s
physical asset holdings are in custody with Komainu Jersey and Zodia Custody, regulated custodians
and depositaries specialising in digital assets.
Technology and Tools
Cyber-security remains a critical focus for the Group. Significant investment in and ongoing
improvement of the Group’s security posture is essential to align the infrastructure of the Group
with its growth. From a completely new physical networking layer to the optimised, secure cloud
environment, these improvements have been validated by the Group’s external information security
audits and accreditations.
Maintaining the integrity of its technical architecture is an ongoing priority and focus of the CS Group’s
executive leadership tests, and, in this regard, the CS Group ensures the undertaking of regular
external reviews and penetration tests whilst also ensuring that its infrastructure is monitored in real-
time by state-of-the-art security monitoring systems. Further, the CS Group’s cloud-based network is
segregated and tied back to physical premises and remote workstations using best-in-class encryption
technology. All data stored on CS Group servers and file stores are fully encrypted at rest and in transit.
The Group’s latest annual independent cyber-security review described the Group’s security
profile as “very strong” and “highly secure”. At the same time, the Group has maintained ISO/IEC
27001 certification since 2019 (the auditable, international standard for Cyber Security), evidencing
adherence to a “best-practice” approach to managing information security by addressing people and
processes as well as technology.
Ah-hoc security tests and attack simulations are regularly undertaken to allow the Group to ensure buy-
in and understanding from all employees. The Group’s endpoint, mobile and perimeter protections are
monitored continuously to adapt to emerging threats and ensure that the Group remains protected
in the ever-changing cyber-security landscape. Furthermore, the Group’s cyber-security controls are
routinely tested as part of the Group’s Compliance Monitoring Plan.
The group continues to leverage technology to assist the risk management and compliance functions
by the use of a new Compliance Management Tool and the continued use of automated monitoring
tools from external providers in Jersey. A policy of ‘continuous improvement’ has been adopted to
ensure that the group looks to having the most effective policies and technological solutions in place
to mitigate the risks it faces in its day to day operations whilst also planning for future activities.
Regulatory and Compliance
The CoinShares Group operates the Three Lines of Defence model, which is considered to be industry
best practice and is composed as follows:
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The First Line of Defence – the client facing operations teams in each of the Group’s jurisdictions;
The client-facing operations teams are responsible for maintaining a strict control environment over
day-to-day operational matters. The first line has a comprehensive control framework, managed
and maintained by them and monitored by the Compliance Function; the framework spans both
organisation wide controls and department specific controls.
The Second Line of Defence – the Group’s Compliance and Risk team;
The Group’s Compliance Team has a number of key responsibilities, including but not limited to:
• the anti-money laundering, countering of terrorism financing and proliferation financing control
framework and associated staff training;
• regular testing of the Group’s control framework;
• liaising with the Group’s various external regulatory bodies;
• undertaking the role of Money Laundering Reporting Officer, Money Laundering Compliance
Officer and Compliance Officer as required; and
• regular reporting/communication of Compliance and risk matters to the monthly Risk &
Compliance Committee and to the relevant Boards.
The Group also benefits from a network of external advisors relied upon as required for guidance on
a range of specialized topics.
The Third Line of Defence – external financial audit and other specialist audit work;
The Group relies upon both the annual financial audit process in addition to more focused specialised
external audit work, undertaken on parts of the business, for example, the work undertaken previously
by Armanino and now by The Network Firm.
Information Dissemination and Transparency
Due to various jurisdictions within which the Group operates, and the variety of activities undertaken
across the Group it is essential that information is disseminated in a timely and consistent manner.
To facilitate this, various committees are in place with meetings held on a regular basis to encourage
the information generated by the Group’s control environment to be disseminated accordingly. Each
committee has documented terms of reference and all relevant information from those committees
is regularly reported to the appropriate boards.
The dissemination of information is not only a focus of the Group internally, but also externally to the
Group’s stakeholders, be they regulators, auditors, existing or prospective clients. As such, an external
assurance report is issued on a daily basis which evidences the quantum of hedging assets (held in
accordance with the terms of the CMA) being in excess of the liability arising from the issuance of XBT
products. The report is prepared by the Network Firm, a third party service provider. Any of the Group’s
stakeholders can download the report from https://etp.coinshares.com/proof-of-reserves. The work
performed by The Network Firm is independent from the Group’s internally generated reports on digital
asset holdings, thus providing an additional level of comfort and accompanying third party opinion.
CEO AND SENIOR EXECUTIVES
The CEO is responsible for the day-to-day administration of the Group in accordance with applicable
laws and regulations, and the instructions and strategies established by the Board of Directors. The
CEO ensures that the Board receives the information required for the Board to be able to make
well-grounded decisions, and monitors compliance with the goals, policies and strategy plans for
CoinShares that are set by the Board of Directors. The CEO is also responsible for ensuring that the
Board is provided with satisfactory information about the Group’s development between regular board
meetings. The CEO leads the work of the Executive Management Committee, which is responsible
for the overarching business development. In addition to the CEO, the Executive Management
Committee included six senior executives as of 31 December 2023: the Chief Financial Officer, the
Group General Counsel, Head of Asset Management, Head of Quantitative Research & Development,
Head of Marketing & Communications and Head of Hedge Fund Solutions.
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Remuneration of the CEO and senior executives
Remuneration of the CEO and other senior executives may consist of a fixed cash salary, discretionary
bonus, other customary benefits and pension. The combined yearly cash remuneration shall be in line
with the going rate in the market and geographic area in which the executive is stationed, and shall be
commensurate with the individual’s qualifications and experience. By other senior executives is meant
the six persons who, together with the CEO, make up the Executive Management Committee. The
guidelines for remuneration of the senior executives include, among other things, principles for the
relationship between fixed salary, pension benefits, and limitations regarding severance pay and fixed
salary during notice periods. Individual remuneration of the CEO and the individual remuneration of
other senior executives are approved by the Board of Directors based on recommendations made by
the Remuneration Committee.
AUDITOR
At the Annual General Meeting on 31 May 2023 it was resolved to elect the chartered accounting firm
Baker Tilly Channel Islands Limited as auditor of the company for a term until the end of the 2023 AGM.
Ewan Spraggon was appointed auditor-in-charge. Ewan Spraggon is a Member of the Insitute of Chartered
Accountants of Scotland and Fellow of the Institute of Chartered Accountants of England and Wales.
EXTERNAL AUDIT
The external audit of the accounts of CoinShares International Limited and all subsidiaries, including
the Board of Directors’ and Group Management’s administration, is performed in accordance with
International Standards on Auditing. The external auditor will attend the majority of quarterly meetings
of the Audit and Risk Committee and at least one board meeting each year, at which the auditors
report on their observations from the audit and their opinion on internal control.
BOARD OF DIRECTORS
Daniel Masters
Assignments and year elected
Born 1963, Chairman of the Board since 2008. Chair of the Remuneration Committee.
Education, professional experience and previous assignments
Daniel holds a Bachelor of Science (Honours) in Physics from Exeter University and a Master’s degree in
Management Science and Operational Research from Imperial College, London.
Daniel has more than 30 years of experience in energy trading. He was, among other things, the Head of
Global Energy Trading for Morgan Guaranty Trust Company (MGT), oversaw several of the trading and risk
management functions at the Energy Division of Salomon, Inc., was involved in the establishment of the
natural gas and electricity markets in the UK, completed some of the first forward contracts for electricity
and was one of the first and most active participants in the market for Contracts for Difference in Europe.
Other current assignments
Director of CB Limited; Director of CommerceBlock Limited; Director of CommerceBlock Holding
Limited; Director of CommerceBlock Limited; Director and Shareholder of Crypto Composite Limited;
Director and Shareholder of Satoshipay Limited; Council Member of Tezos Foundation.
Non-Executive Director’s fee (yearly)
Salary - £125,000
Bonus - £Nil
Buy-out payment - £225,000
Benefits in kind - £12,500
Fee for committee work
Included within Director’s fee.
Independent in relation to the company and Group management
No. Daniel Masters was employed by the Company until 29 November 2021.
Independent in relation to major shareholders
No.
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Own and related parties’ shareholdings as per 31 December 2023
14,764,760 ordinary shares.
Attendance at board meetings
7 of 7 possible.
Attendance at Remuneration Committee meetings
2 of 2 possible.
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Jean-Marie Mognetti
Assignments and year elected
Born in 1984, Board member since 2014. Member of the Executive Management Committee.
Education, professional experience and previous assignments
Jean-Marie holds a Master’s degree in Mathematical Trading and Finance from Sir John Cass Business
School.
Jean-Marie is an experienced commodities trader with a background and expertise in quantitative
analysis, risk management and alpha-generation through macro commodity-oriented programs,
including cryptocurrencies. Prior to joining CoinShares, Jean-Marie was a quantitative strategist with
Hermès Commodities Fund Managers.
Other current assignments
Council Member of the Aventus Protocol Foundation; Director of FlowB Holding Switzerland SA; Director of
FlowBank SA; Director of JFM & FK Management Services; Director and Shareholder of Mognetti Partners
Limited; Director of Komainu Holdings Limited; Director of Tactiques D’avant-Garde (Jersey) Limited.
Fee for committee work
Not applicable.
Independent in relation to the company and Group management
No.
Independent in relation to major shareholders
No.
Own and related parties’ shareholdings as per 31 December 2023
11,876,609 ordinary shares and 618,356 share options.
Attendance at board meetings
7 of 7 possible.
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Carsten Køppen
Assignments and year elected
Born in 1964, non-executive Board member since 2020. Member of the Remuneration Committee,
member of the Audit & Risk Committee.
Education, professional experience and previous assignments
Carsten holds a Diploma in Banking from the Danish School of Banking.
Carsten has 40 years of experience in financial services, including stock exchange equity trading,
investment advisory, capital market debt and fixed income, alternative asset management and
asset servicing. He is a specialist in corporate governance and best practices within the alternative
investment fund industry, and is also, among other things, independent, regulated non-executive
director and Member of the Board to various alternative investment structures and managers.
Other current assignments
Director of Triton Managers Limited; Director of Triton Managers II Limited; Director of Triton Managers
III Limited; Director of Triton Managers IV Limited; Director of Triton Managers V Limited; Director
of Triton Smaller Mid Cap General Partner Limited; Director of Triton Debt Opportunities Managers
Limited; Director of Triton Debt Opportunities Managers II Limited; Director of Triton Managed
Account General Partner Limited; Director of Octopus Alternative Investment Fund Management
Limited; Council Member of the Aventus Protocol Foundation.
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Director’s fee (yearly)
£50,000
Fee for committee work
Included within Director’s fee.
Independent in relation to the company and Group management
Carsten held a non-executive directorship position on the Board of CoinShares (Jersey) Limited, a
Group Company, until the end of November 2021.
Independent in relation to major shareholders
Yes.
Own and related parties’ shareholdings as per 31 December 2023
9,750 ordinary shares.
Attendance at board meetings
7 of 7 possible.
Attendance at Audit Committee meetings
7 of 7 possible.
Attendance at Remuneration Committee meetings
2 of 2 possible.
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Johan Lundberg
Assignments and year elected
Born in 1977, non-executive Board member since 2020. Member of the Nomination Committee.
Education, professional experience and previous assignments
Johan holds an MBA in Finance from Stockholm School of Economics; MBA in International Strategy
from Stockholm University.
Johan is a founding partner of NFT Ventures, an early- and growth-stage fund founded in 2014 to
capture the opportunity in transformation of banking and financial services.
Other current assignments
Chairman of Betsson AB; Chairman of Alfa Kraft Fonder AB; Chairman of Barcelona Opportunity AB
(publ); Chairman of Barcelona Development Corporation AB; Chairman of NFT Growth 2 AB; Director
and CEO of NFT Growth Partners AB (publ); Director and CEO of Investment AB Stentulpanen; Director
and CEO of AB Stentulpanen Försäkringar; CEO of Stenbuketten Invest AB; CEO of Investment AB
Vildtulpanen; Director of Svolder AB; Director of Loomis AB; Director of Wakakuu AB; Director of
Contemporary Wines Sweden AB (publ); Director of Pensa Sverige AB; Director of MR Cake AB;
Director of MR Cake Göteborg AB; Director of MR Cake retail AB; Director of MR Cake Holding AB;
Director of Stentulpanen Fastigheter Smedby AB; Director of Fastighets AB Stentulpanen Stockholm;
Director of Stentulpanen Fastigheter i Kalmar & Öland AB; Director of Fastighets AB Stentulpanen;
Director of Kapitalförvaltnings AB Stentulpanen; Director of Nordic Collection AB; Director of NFT
Ventures AB; Director of NFT Ventures 1 AB; Director of NFT Ventures 2 AB; Director of NFT Ventures
CV 1 AB; Director of NFT Ventures Invest AB; Director of Purslane Ventures AB; Director of Ölands Bank
AB; Director of Roy Fares AB; Director of SoliFast Holding AB; Director of Global Fintech Industries AB.
Director’s fee (yearly)
£50,000
Fee for committee work
Included within Director’s fee.
Independent in relation to the company and Group management
Yes.
Independent in relation to major shareholders
Yes.
Own and related parties’ shareholdings as per 31 December 2023
2,500 ordinary shares.
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Attendance at board meetings
7 of 7 possible.
Attendance at Remuneration Committee meetings
1 of 2 possible.
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Christine Rankin
Assignments and year elected
Born in 1964, non-executive Board member since 2021. Member of the Remuneration Committee;
member of the Audit & Risk Committee.
Education, professional experience and previous assignments
Christine holds a Bachelor in Business Administration and Economics from Stockholm University.
Christine is a former Partner at PWC and has held positions of trust at several organisations including
Veoneer Inc, Spotify, NASDAQ and Cherry AB.
Other current assignments
Director and audit committee chair of 4C Group AB; Director and audit committee chair of
Bonesupport AB; Director of Orexo AB; Director and audit committee chair of Starbreeze AB (publ).
Director’s fee (yearly)
£50,000
Fee for committee work
Included within Director’s fee.
Independent in relation to the company and Group management
Yes.
Independent in relation to major shareholders
Yes.
Own and related parties’ shareholdings as per 31 December 2023
N/A.
Attendance at board meetings
7 of 7 possible.
Attendance at Audit Committee meetings
7 of 7 possible.
Attendance at Remuneration Committee meetings
1 of 2 possible.
-----
Viktor Fritzén
Assignments and year elected
Born in 1985, non-executive Board member since 2021. Member of the Audit & Risk Committee.
Education, professional experience and previous assignments
Viktor holds a Master in Finance from the Stockholm School of Economics.
Viktor previously held analyst positions at Goldman Sachs and GP Bullhound and was CFO of
LeoVegas AB.
Other current assignments
Chairman of Appjobs Sweden AB; Director of Beyond Zebra; Director of Cithara BidCo AB; Director of
Cithara HoldCo AB; Chairman of StickerApp Holding AB; Director of Safello AB.
Director’s fee (yearly)
£50,000
Fee for committee work
Included within Director’s fee.
Independent in relation to the company and Group management
Yes.
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Independent in relation to major shareholders
Yes.
Own and related parties’ shareholdings as per 31 December 2023
40,100 ordinary shares.
Attendance at board meetings
7 of 7 possible.
Attendance at Audit Committee meetings
7 of 7 possible.
GROUP MANAGEMENT
Jean-Marie Mognetti
Group Chief Executive Officer
Education, professional experience and previous assignments
As disclosed above
Other current assignments
As disclosed above
Own and related parties’ shareholdings as per 31 December 2023
As disclosed above
Attendance at Executive Management Committee meetings
13 of 13 possible.
-----
Richard Nash
Chief Financial Officer
Education, professional experience and previous assignments
Richard holds a Master’s degree in Sinology from the School of Oriental and African Studies, University
of London.
Richard has 13 years of experience in chartered accounting. Richard joined CoinShares from Cairn
Financial Advisers where he acted as Nominated Adviser to a number of listed companies, holding the
status of Qualified Executive (as granted by the London Stock Exchange). Richard was formerly part
of the RSM UK Capital Markets Team, where he acted as reporting accountant to a number of listings.
Other current assignments
N/A.
Own and related parties’ shareholdings as per 31 December 2023
900 ordinary shares and 204,423 share options.
Attendance at Executive Management Committee meetings
13 of 13 possible.
-----
Graeme Dickson
Group General Counsel
Education, professional experience and previous assignments
Graeme holds a Master’s degree (Honours) in International Relations from University of St. Andrews
and Post Graduate Diploma in Law from the University of Law.
Graeme has 14 years of experience as an English qualified solicitor. He joined CoinShares from Aviva
Plc. where he held the position of Senior Legal Counsel. Prior to that he held positions at Linklaters,
White & Case, Bank of America and Standard Bank.
Other current assignments
N/A.
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Own and related parties’ shareholdings as per 31 December 2023
169,114 share options.
Attendance at Executive Management Committee meetings
13 of 13 possible.
-----
Frank Spiteri
Head of Asset Management
Education, professional experience and previous assignments
Frank has over 10 years of experience as an ETP specialist, joining CoinShares after previously working
as the former Head of Distribution and Capital Markets at WisdomTree. Prior to specialising in ETPs,
he spent 11 years working as a trader with KBC Financial Products.
Other current assignments
N/A
Own and related parties’ shareholdings as per 31 December 2023
401,671 ordinary shares and 1,149,995 share options.
Attendance at Executive Management Committee meetings
12 of 13 possible.
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Pierre Porthaux
Head of Quantitative Research & Development
Education, professional experience and previous assignments
Pierre has close to 20 years’ experience in finance in both traditional markets and cryptocurrencies.
Prior to CoinShares, Pierre co-founded Blockchain Solutions, a technology and strategy consulting
company, and Emergence Labs, specialised in Bitcoin trading technology, both located in Paris.
Previously, Pierre was a trader undertaking statistical and index arbitrage strategies for banks and
hedge funds such as Nomura, Millennium Partners, Dresdner Kleinwort and Natixis.
Other current assignments
N/A
Own and related parties’ shareholdings as per 31 December 2023
170,030 share options.
Attendance at Executive Management Committee meetings
10 of 13 possible.
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Benoît Pellevoizin
Head of Marketing & Communications
Education, professional experience and previous assignments
Benoît graduated from the Celsa Sorbonne Université (Grande Ecole of Communications & Journalism)
and the Hasso Plattner Institute School of Design Thinking. Benoît has over 15 years of experience in
developing marketing, communications, advertising and branding. He joined CoinShares from the
leading crypto hardware firm Ledger. Prior to that he has held positions involving strategy, branding
and innovation with Ogilvy Consulting, SID LEE, M&C Saatchi, Fred & Farid and Digitas.
Other current assignments
N/A
Own and related parties’ shareholdings as per 31 December 2023
40,000 share options.
Attendance at Executive Management Committee meetings
12 of 13 possible.
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Meltem Demirors
Head of Strategy
(resigned from Executive Management Committee 31 December 2023)
Education, professional experience and previous assignments
Meltem holds a Bachelor’s degree in Mathematical Economics from Rice University and an MBA with
a focus on Finance and Innovation from Sloan School of Management, Massachussetts Institute of
Technology (MIT).
Meltem has prior experience in the oil and gas industry in trading, corporate treasury and M&A roles.
She helped build and grow the Digital Currency Group, managing a portfolio of 120 companies and 4
subsidiaries, is a founding member of the World Economic Forum Blockchain Council, and teaches
at MIT as well as Oxford.
Other current assignments
Advisor to Shyft Network; Advisor to Metaplex Foundation; Director of Stacks Foundation; Director of
Compass Mining Inc (Representing CoinShares Group); Director of Mintgreen Blockchain Innovation
Corporation (Representing CoinShares Group); Director of Choice FinTech Holdings (previously
Kingdom Trust)(Representing CoinShares Group); Director of Ejara (Representing CoinShares
Group); Director of 3iQ Corp (Representing CoinShares Group); Director of The Topps Company,
Inc.; Advisor to Blockdaemon; Advisor to Casa; Managing Member of Shiny Pony LLC; Programme
Director at Oxford Saïd Business School.
Own and related parties’ shareholdings as per 31 December 2023
2,778,020 ordinary shares and 422,125 share options.
Attendance at Executive Management Committee meetings
6 of 13 possible.
-----
Lewis Fellas
Head of Hedge Fund Solutions
(joined the Executive Management Committee effective 31 December 2023)
Education, professional experience and previous assignments
Lewis holds Bachelor and Master’s degrees in Chemistry from the University of Reading and an
MBA from Cambridge Judge Business School. Lewis is a veteran asset manager with over 23 years
of experience gained at JPMorgan London, hedge funds in Hong Kong and the Harvard Endowment
in Boston. Lewis has 7 years experience in Crypto having founded one of the earliest Crypto funds,
Bletchley Park, in 2017.
Other current assignments
Director of Spring IM Limited.
Own and related parties’ shareholdings as per 31 December 2023
300 ordinary shares.
Attendance at Executive Management Committee meetings
N/A
-----
SHARES, SHAREHOLDERS AND SHARE CAPITAL
GENERAL INFORMATION
CoinShares International Limited was listed on Nasdaq Stockholm in December 2022. According
to the company’s Articles of Association, the share capital of the company shall be no more than
£99,000 divided into 200,000,000 Ordinary Shares in a single share class. The company’s registered
share capital as of 31 December 2022 was £33,666.82, divided among 68,013,771 Ordinary Shares.
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The shares, which are denominated in British pounds (GBP), had a share price of £0.000495. The
company’s shares have been issued in accordance with Jersey law. All issued shares are fully paid for
and freely transferable. The company’s shares are listed on the regulated multilateral trading facility,
Nasdaq Stockholm, and the ISIN code for CoinShares International Limited’s shares is JE00BLD8Y945.
The company’s shares are not the subject of any offer that has been made as a result of a mandatory
bid, redemption right or redemption obligation. Nor has any public takeover offer been made for the
shares during the current or preceding financial years.
Certain rights associate with the shares
The company’s shares are all of the same class. The rights associated with shares issued by the
company, including those pursuant to the Articles of Association, may only be amended in accordance
with the procedures set out in Companies (Jersey) Law 1991.
Voting rights
Each share entitles the holder to vote at general meetings, and each shareholder is entitled to a
number of votes corresponding to the shareholder’s total holding of shares in the company.
Preferential rights to new shares
In accordance with Article 3 of the Articles of Association (the “Articles”), the company shall not allot
and issue ordinary shares, or rights to subscribe for, or to convert securities into, ordinary shares
(‘Equity Securities”), to any person on any terms unless it has made an offer to each Shareholder on the
same or more favourable terms (the “Preferential Rights”). These Preferential Rights shall not apply to:
1. any ordinary shares issued pursuant to the exercise of warrants;
2. in one or more tranches of ordinary shares as does not in the aggregate exceed ten percent (10%)
of the total number of ordinary shares in issue at 9am on 1 January of such year; and
3. any Equity Securities allotted and issued by the Directors in the three years following adoption of
the Articles pursuant to any employee incentive or bonus plan or scheme. Such Equity Securities
not to exceed fifteen percent (15%) of the total number of ordinary shares in issue at the date of
the adoption of the Articles.
DIVIDEND AND DIVIDEND POLICY
General
All shares carry equal entitlement to a share in the company’s profits and to the company’s assets and
any surpluses in the event of liquidation. Resolutions regarding dividends in limited liability companies are
made by a general meeting of shareholders or by the Directors if justified by the profits of the Company.
Entitlement to dividends accrues to those who, on the record date resolved by a general meeting
of shareholders or the Directors, are registered in the shareholder register maintained by Euroclear
Sweden as holders of shares. Dividends are normally paid to the shareholders as a cash amount
per share through Euroclear Sweden, although they may also be paid in a form other than cash (in-
kind dividend). If a shareholder cannot be reached through Euroclear Sweden, the shareholder will
continue to have a claim against the company for the dividend amount for a period that is limited
by rules concerning a ten-year statute of limitation. After expiration of this limitation period, the
dividend amount accrues to the company. There are no restrictions on dividend rights in respect of
shareholders who reside outside Sweden.
Dividend policy
Following the financial year end, the Company announced the adoption of a dividend policy.
The policy stipulates that the annual dividend payment will be between 20% and 40% of the Group’s
annual total comprehensive income, excluding currency translation differences.
The annual dividend payment will be made payable in SEK in four quarterly instalments via the
Euroclear Sweden settlement system, subject to an assessment by the Board of the financial health
and cash requirements of the Group prior to each payment being made, in accordance with Jersey law.
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CENTRAL SECURITIES DEPOSITORY
CoinShares International Limited’s shares are registered in an electronic VPC register in accordance
with the Central Securities Depositories and Swedish Financial Instruments Accounts Act (Lagen
(1998:1479) om värdepapperscentraler och kontoföring av finansiella instrument). No share certificates
have been issued for the company’s shares registered in the VPC register. The account operator is
Euroclear Sweden.
CONVERTIBLES, WARRANTS, AUTHORISATIONS TO ISSUE SECURITIES, ETC.
Incentive programs
In accordance with the Articles of Association, the Board of Directors is authorised, in three years from
the date of adoption of the Articles of Association (20 June 2022), to issue share options that do not,
in aggregate, exceed 15% of the total number of outstanding ordinary shares. The employee incentive
program (“EIP”) is governed by general terms and conditions and individual share option agreements
with the holders of share options.
The aim of the EIP is to create conditions to retain and increase motivation of senior executives,
other employees and other key persons in the company and Group. The Board of Directors believes
that it is in the interests of all shareholders that senior executives, other employees and key persons
have a long-term interest in good growth in the value of the company’s shares. A long-term owner
engagement is expected to stimulate greater interest in the business and its earnings performance
overall and enhance motivation among the participants and aims to achieve a greater foundation for
shared interests between the program’s participants and the company’s shareholders.
Share Options issued under the EIP - November 2020
On 25 October 2019 the Board of CoinShares (Holdings) Limited, a Group Company, resolved on an
incentive program that was approved by its shareholders on 29 October 2019. During March 2020,
warrants were issued based on the terms for the incentive program for employees. The Share Options
issued under the incentive program for employees in CoinShares (Holdings) Limited were transferred
to CoinShares International Limited on 24 November 2020 on the same terms as Share Options
granted at CoinShares (Holdings) Limited level. The number of share options issued were adjusted
in connection with the transfer in order to ensure the recipient received share options corresponding
to the number which were initially issued. The strike price was adjusted accordingly. Following the
transfer of the share options from CoinShares (Holdings) Limited to CoinShares International Limited,
no options exist in CoinShares (Holdings) Limited.
A total of 2,955,920 share options were issued and held by key employees in Jersey, the UK and the US.
Of these share options, 1,011,320 were issued with 13 March 2023 as the vesting date.
The remaining 1,944,600 share options, held by the Group’s Head of Asset Management Frank Spiteri,
are subject to certain vesting criteria that need to be fulfilled; (i) double the Group’s AUM, (ii) double
the customer count and (iii) drive team performance (determined by the Board). The vesting terms
are outlined in a separate share option agreement between the company and Frank Spiteri.
The following terms apply to all 2,995,920 share options:
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to £1.43, equivalent to the
fair market value of one ordinary share at issuance (adjusted accordingly following the transfer to
the company) and as determined by a third party valuation specialist.
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Share Options issued under the EIP – March 2021
On 22 February 2021, the Board resolved to grant key employees a total of 183,489 share options. The
following terms apply to all 183,489 share options:
• the share options would vest in eight equal tranches over the 24 months from the date of issue,
being 11 March 2021;
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 44.9, equivalent to
the subscription price in Prospectus dated 22 February 2021.
Share Options issued under the EIP – April 2021
On 26 March 2021, the Board resolved to grant key employees a total of 373,944 share options. The
following terms apply to all 373,944 share options:
• vesting date of 19 April 2024;
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 94.4.
Share Options issued under the EIP – March 2022
On 21 January 2022, the Board resolved to grant key employees a total of 670,002 share options. The
following terms apply to all 670,002 share options:
• vesting date of 18 March 2025;
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 82.3.
Share Options issued under the EIP – June 2022
On 8 June 2022, the Board resolved to grant a key employee a total of 40,400 share options. The
following terms apply to all 40,400 share options:
• vesting date of 1 March 2025;
• each share option gives the shareholder the right to subscribe for one ordinary share in the
company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 114.0
Share Options issued under the EIP – March 2023
On 20 February 2023, the Board resolved to grant key employees a total of 448,000 share options. The
following terms apply to all 448,000 share options:
• vesting date of 20 March 2026;
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 31.0.
Share Options issued under the EIP – March 2024
On 19 March 2024, the Board resolved to grant key employees a total of 115,000 share options. The
following terms apply to all 115,000 share options:
• vesting date of 20 March 2027;
• each share option gives the share option holder the right to subscribe for one ordinary share in
the company;
• the share options were issued free of charge; and
• the subscription price (strike price) for each ordinary share amounts to SEK 50.4.
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Number of Shares
Registration date Event Change Total
11 March 2021 IPO - 66,551,863
6 July 2021 Consideration for acquisition 1,298,322 67,850,185
16 December 2021 Consideration for acquisition 363,636 68,213,821
11 January 2023 Cancellation of shares (78,396) 68,135,425
8 August 2023 Cancellation of shares (121,654) 68,013,771
31 December 2023
68,013,771
As of 31 March 2024, 1,031,254 share options had either lapsed, been exercised or cancelled.
If all 3,755,501 outstanding share options in the company were to be exercised for subscription of
ordinary shares, the maximum dilution amounts to approximately 5.55 percent of the number of
outstanding ordinary shares as at 31 March 2024.
GROWTH IN SHARE CAPITAL
Since the company’s shares were listed for trading on Nasdaq First North Growth Market on 11 March
2021, the company has decided on new share issues on two occasions and cancelled own shares on
two occasions.
The below is a table of the number of shares and registered share capital shows registrations related
to the historical development of these new share issues and other events pertaining to the company’s
share capital.
Shareholders Shares Share of Ownership
Daniel Masters 14,764,760 21.71%
Mognetti Partners Limited 11,876,609 17.46%
Russell Newton 8,096,078 11.90%
Alan Howard 7,913,040 11.63%
Adam Levinson 3,896,618 5.73%
Paul Davidson 3,200,000 4.70%
Dwight Anderson 2,783,576 4.09%
Meltem Demirors 2,778,020 4.08%
Vitruvius Limited 2,566,213 3.77%
Horseferry Trading Ptd Limited 1,550,604 2.28%
Total 10 largest shareholders 59,425,518 87.37%
Other shareholders 8,588,253 12.63%
Total 68,013,771 100%
OWNERSHIP STRUCTURE
The table below shows CoinShares International Limited’s largest shareholders as per 31 December
2023. The company had 3,450 shareholders on 31 December 2023.
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0
10
20
30
40
50
60
Jan-23 Feb-23 Mar-23 Ap r- 23 M ay -23 Jun-23 Jul-23 Au g-23 Sep- 23 Oct-23 Nov-23 De c-23
Share Price (SEK)
Share Price (SEK)
SHARE PRICE DEVELOPMENT
The graph below shows movements in the company’s share price during the year. CoinShares
International Limited’s shares are traded under the ticker code “CS”. The initial listing was on Nasdaq
First North Growth Market in March 2021 and the Company’s shares were listed for trading on Nasdaq
Stockholm on 19 December 2022. The initial listing price was SEK 44.9. The lowest price paid for the
shares in 2023 was SEK 20.6 and the highest price paid during the year was SEK 56.1. The price of the
shares was SEK 41.3 at year-end.
Shareholder agreements
To the best of the knowledge of CoinShares International Limited’s board of directors, there are
no shareholder agreements or other agreements between the company’s shareholders that are
intended to influence the company. Nor is the company’s board aware of any agreements or similar
undertakings that could lead to a change in control over the company.
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SUSTAINABILITY REPORT
INTRODUCTION
CoinShares’ Sustainability Report aims to be transparent and pertinent to ensure that stakeholders
can easily learn about our sustainability efforts and gain an understanding of our performance and
progress over time in relation to Environmental, Social and Governance (“ESG”) initiatives. This report
presents the events and outcomes for 2023.
The disclosures are structured according to our key sustainability topics. The report has been written
with reference to the Swedish Annual Accounts Act (1995:1554), and is presented in four sections, as
follows:
1. Strategy & Current Position
2. Sustainability
3. Environmental Initiatives
4. Social Initiatives
The governance of the Group, which forms a key part of the ESG initiatives is presented separately
within the Corporate Governance section of the Annual Report.
1. STRATEGY & CURRENT POSITION
Strategy
In 2023 we built upon our initial ESG strategy created in 2022 and refined certain elements so that
ESG is considered a core pillar of our business initiatives and company culture. We monitored our
ESG framework that sets clear objectives and can be transparently measured to demonstrate our
commitment to ESG. Our ESG Strategy is supported by a company-wide and Board approved ESG
Policy, which requires mandatory acknowledgement by all of our CoinShares employees.
The three pillars of our strategy are:
• Sustainability: adopting climate change friendly standards and working towards reducing our
CO
2
footprint.
• Education: market leading information provider in the crypto ecosystem from novices to industry
experts.
• Investing in the future: promoting and developing next generation talent from universities and
nurturing existing personnel within the Group.
We aim to consider each of these in all our ESG initiatives, and also to promote them within the
company wide culture of the Group.
These core pillars are crucial to our ability to be responsible and effective stewards of the digital asset
ecosystem as cryptocurrencies are inherently political, social, and economic in nature. As a company
we have always therefore been interested and invested in the development of initiatives in relation to
digital assets and digital asset investing, particularly through the output of our Research arm. Finally,
these pillars ensure that we are rightfully and actively considering our external impacts on the wider
community and market outside of the digital assets environment.
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Current Position
For the nascent cryptocurrency industry, CoinShares is considered in its formative stages of its ESG
journey. We have therefore taken steps in 2023 (and the two consecutive earlier years) to peer assess
our ESG credentials against other leading financial institutions. It is important to quantify where we
are placed in our ESG journey, allowing us to quantify the progress made as we move forward and the
industry around us evolves.
CoinShares completed the S&P Global Corporate Sustainability Assessment (“CSA”) that tested a wide
range of ESG criteria, benchmarked scoring against some 600+ financial institutions such as banks
and financial technology (FinTech) participants. The submission process provided useful insights into
specific improvement areas for the Group in the future. Our 2023 ESG score is comparable to industry
peers whereby we saw score improvements in the Corporate Governance and Risk Management
topics on the back of tumultuous crypto market events, such as FTX and Celsius. However, there are
further efforts and investments required to support our ongoing ESG efforts. For instance, in 2023 the
Group has engaged with a sustainability solution to build a complete carbon footprint picture for our
office locations and to recommend any new ESG initiatives, such as emission reduction plans. Once
these initiatives are implemented, management will define key performance indicators for the Group
to measure their growth and improvement in the ESG space.
We completed a company first ESG Materiality Assessment to identify focal areas that are key to our
long-term ESG Strategy. The results of this assessment help to organise our sustainability initiatives and
to prioritise the ESG matters of the highest importance. The ESG Materiality Matrix is displayed below:
ESG Materiality Matrix
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2. SUSTAINABILITY
Sustainability & Output of Research Team
The digital asset industry is at the forefront of the technology to ensure a more efficient energy usage
environment for financial services in the future, and we seek an active role in ensuring the potential of
these advancements are widely known.
In 2023, the Research team published a “Bitcoin Mining Report” (https://blog.coinshares.com/
coinshares-mining-report-the-halving-and-its-impact-on-hash-rate-and-miners-cost-structures-
8646835d88ac) that showcases the sustainability improvements with the energy intensive Bitcoin
mining. There have been efficiency gains of Bitcoin mining compared to earlier years. For instance,
there has been an 8% improvement in efficiency over 2023 and over the past three years, efficiency was
enhanced by 28%. There is a growing trend for Bitcoin miners to utilise renewable energy sources for
their mining activities, which decreases the impact of carbon dioxide emissions on the environment.
In Texas, where a significant proportion of Bitcoin mining occurs, renewable energy usage grew from
20% of total energy produced in 2017, to 31% in 2023 according to data from IEEFA. Finally, gas flaring
for stranded energy sources such as oil rigs has been an increasingly serious problem because flaring
excess gas contributes to approximately 406 million tonnes of CO2 emissions per year. Through
innovative solutions, Bitcoin mining can alleviate this problem by housing mining hardware, along with
the necessary generators, in containers and being able to operate in these remote and hard-to-reach
locations far from established power grids. As global flaring currently comprises 1.1% of global CO2
emissions, Bitcoin mining could reduce global flaring emissions to just 0.41% of global emissions.
In September 2022, the Ethereum network switched from proof-of-work to a proof-of-stake consensus
model, also known as “The Merge”. The switch led to Ethereum’s network greenhouse gas emissions
dropping by an estimated 99.97% according to the Cambridge Centre for Alternative Finance (CCAF)
report published in December 2023. The CCAF estimates pre-Merge greenhouse gas emissions were
about 10.3 MCO2e and post-Merge greenhouse gas emissions were 2.8 KtCO2e. Also, the Ethereum
network is powered by roughly 48% sustainable energy, such as wind and nuclear energy. These
Ethereum developments support the digital assets industry drive for improved sustainability.
Cyber Security Risks and Hacking Risks
The further development of digital asset networks could lead to increased security risks. Many digital
assets and their underlying networks have historically experienced security issues, hacks, and software
errors. Such risks must be efficiently and successfully addressed so that bugs and security risks are
mitigated to the greatest extent possible. Even if a high level of security is achieved, malicious actors
could still successfully target digital asset networks and/or exchanges which may lead to financial
losses to holders, as seen historically.
Malicious actors have in the past targeted platforms and exchanges to exploit them and are now also
targeting the infrastructure for decentralised finance (“DeFI”) and various smart contracts.
To address this risk, we are continuing to invest in our state-of-the-art cyber security processes and
controls. These include but are not limited to a dedicated incident response team, 24/7/365 altering,
estate monitoring and threat intelligence.
As an industry leader in our sector, it is important for us to protect ourselves and our clients against
financial crime. We have strong financial crime processes and procedures that provide protection, but
also identify bad actors and organisations. Due to the nature of the industry within which the Group
operates, coupled with the nature of the services and products provided, a robust control environment
is paramount to protect the Group’s stakeholders, ensure compliance with regulatory requirements
of the Group, and allow for accurate and timely dissemination of information throughout the Group.
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Cyber-security remains a critical focus for the Group. Significant investment in and ongoing
improvement of the Group’s security posture is essential to align the infrastructure of the Group with
its growth. The continuous improvements have been validated by the Group’s external information
security audits and accreditations.
Since 2021 the Group has maintained its ISO27001 certification (international standard for information
security management), evidencing adherence to a “best-practice” approach to the management of
information security by addressing people and processes as well as technology. Company Personnel
are required to complete mandatory Cyber Security training upon joining and at least annually so that
they are well equipped to identify and take appropriate action for high-risk Cyber Security scenarios.
Ad-hoc security tests and attack simulations are regularly undertaken allowing the Group to
ensure buy-in and understanding from all employees. The Group’s endpoint, mobile and perimeter
protections are monitored on an ongoing basis to adapt to emerging threats and to ensure the Group
remains protected in the ever-changing landscape of cyber security. Furthermore, the Group’s cyber-
security controls are routinely tested as part of the Group’s Compliance Monitoring Plan.
Growth & Development of Personnel & Company Culture
We aim to invest in a responsible manner to scale and preserve the company culture without adversely
impacting future prospects, including the Group’s ability to retain and recruit personnel and to
effectively focus on and pursue the Group’s short term and long-term objectives.
The culture within CoinShares is entrepreneurial in nature due to the novelty of the crypto assets
industry. Our values of: Trust, Transparency, Collaboration, Respect and Integrity are ingrained into our
CoinShares employees where it is vitally important to build a digital assets market fit for institutional
investors that is both robust and well regulated.
Anti-Money Laundering and Terrorist Financing
The Group has a variety of systems and controls in place that allow for the ongoing monitoring and
appropriate levels of control of all its digital asset holdings and positions with each of the exchanges
and custodians it uses. This is to ensure that the Group and its clients are compliant with both local,
national and international regulations, legislation and standards.
All exchanges and custodians with which the Group interacts for the purpose of either digital asset
storage or trading are subject to stringent counterparty onboarding and ongoing due diligence checks.
These are integrated fully with the Group’s internal systems prior to engaging in any kind of active
relationship. Exchanges and Custodians are all subject to risk-based periodic reviews.
This risk of the Group is further mitigated by the fact that most of the Group’s physical asset holdings
are in custody with regulated and reputable digital assets custodians in equivalent jurisdictions such
as Zodia Custody and Komainu Jersey, which act at arm’s length to the Group.
3. ENVIRONMENT
The environment within which the Group operates is wide-ranging and there are both direct and
indirect impacts from company activities. The Group aims to minimise its carbon footprint as much
as possible and employs effective company stewardship to enable positive climate change action. The
Group’s activities have limited direct environmental impact; however, we prioritise the issue because
we know it is important to run our business in a way that minimises our ecological footprint and leaves
the environment in a better state for future generations.
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There has been significant negative press coverage in regard to the environmental impact of Bitcoin
mining due to its high energy usage. It is important to highlight that the Group is not directly engaged
in Bitcoin mining and the vast majority of our transactions in Bitcoin are off-chain. Generally, there has
been a noticeable drive for the use of renewable energy sources for Bitcoin mining activities due to
increased focus on sustainability by global events such as the Dubai COP28 symposium.
Green Investments
Through both our venture fund and balance sheet investments, the Group has invested in a number
of innovative companies focused on accelerating the buildout and utilisation of renewable energy
sources and energy management systems using cryptocurrency as a dual revenue generator and
incentive mechanism to fuel adoption, a topic which our Research team has written about extensively
over the years.
In 2021 CoinShares invested in the company MintGreen, which is a clean technology company that
uses Bitcoin mining to monetise heat generation. MintGreen is focused on addressing two of the
primary concerns related to cryptocurrency mining - sustainability and power costs. MintGreen builds,
manages, and maintains industrial Bitcoin mining systems co-located with utilities and industrial
plants to produce guaranteed income from two revenue streams - cryptocurrency and the sale of
heat. MintGreen has built a proprietary solution to capture heat emitted from Bitcoin mining and sell
it to buyers of heat.
The Group is an investor in Daylight Energy, which helps consumers upgrade their home energy
footprint and incentivises energy saving through the issuance of points which can be redeemed for
cash and other incentives. For instance, homeowners can use Daylight Energy to help install solar
panels that produce gas and electricity without having to rely on power from the national grid, thereby
reducing homeowner power bills drastically in an environmentally friendly and sustainable manner.
Crypto Climate Accord
The Group remains a committed supporter of the Crypto Climate Accord, a private sector-led initiative
committed to making the cryptocurrency industry 100% renewable. One of the objectives includes
achieving net-zero emissions from electricity consumption by 2030. Inspired by the Paris Climate
Agreement, the Accord brings together the crypto and FinTech industry to build a sustainable future
for global finance with support from the United Nations Framework Convention on Climate Change
(“UNFCCC”) Climate Champions.
Jersey Trees For Life
We continued our paid membership of the Jersey Trees for Life organisation by allowing CoinShares
employees time away from work to clear paths and help maintain the health of the trees (Alder
Collection Restoration) with the local Jersey community. This initiative assisted our local community in
reducing our carbon footprint as well as preserving wildlife living in their habitats. The Alder Collection
Restoration Project, an extension of the Alder Collection, which has been planted and maintained by
Jersey Trees for Life since the early 1990’s, is designed to protect and restore the trees, habitats of
endangered species, and improve the livelihoods of thousands of people who will be able to enjoy the
site in the future.
Office Environment
In 2023, the CoinShares employees in two of our locations moved into new office locations in both
London and Paris. The office moves were part of a cost reduction plan due to increasing office rents
though the office amenities offered to staff in the new locations are of a high standard and the space
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allows for further employee headcount additions. The office floors offer a collaborative workspace for
our employees and clients to ensure that fertile ideas are shared amongst the functional departments.
The new London office is situated opposite the Bank of England, which signifies the intersection of
traditional finance and the new digital assets industry.
As a technology driven company a crucial part of our success is providing our people with an optimal
set of IT equipment. Having the right tools is a necessity to keep developing and maintaining the
innovative products and services we offer customers and partners. That said, the Group endeavours
as much as possible to maintain a sustainable consumption of physical electronic goods. The Group
reuses as much of the IT equipment necessary for business operations as possible and ensures that
every device gets used for its full product life before it is recycled.
As a global organisation we aim to host meetings virtually to minimise the carbon footprint of Company
Personnel.
4. SOCIAL
Confidence and the highest reputational standards for the Group are a crucial part of our business
and critical to our success. Trust and confidence are earned by acting responsibly and by meeting
or exceeding expectations. Our Social impacts relate to the relationships held with our impacted
stakeholders, including employees, clients, and the local community.
Our focus is on ensuring that we have the right people working in the most effective organisation
structure to support the strategy of the Group - committed employees are the foundation of
CoinShares’ success. Creating a stimulating, rewarding work environment where employees want to
stay, and nurturing the next generation’s talents is critical to longevity and retaining the role of digital
asset management market leader. CoinShares strives to be an attractive and responsible employer.
Being responsible requires a long-term perspective. Skills development, diversity, compensation, and
health are high-priority issues. Our work is governed by the applicable laws and regulations in the
markets where the Group operates, as well as several policies such as guidelines for conduct, ethics,
and human resources policies.
Wider Cryptocurrency Adoption
In lieu of the current traditional finance model, cryptocurrencies and digital assets are designed and
developed for the entire mass market to adopt. The current traditional finance model caters for the
developed nations who have stable economies that can manage low inflation risk whereas developing
nations have high inflation risk leading to the devaluation of their citizens’ savings and incomes. Over
half of the world lives in an economy of authoritarianism and/or recurring double-digit inflation.
CoinShares is a staunch supporter of including billions of people in the global economy and giving
them sovereignty over their money. Hence, we are proud to offer Exchange Traded Products (“ETPs”)
to clients to cater for this type of financial inclusion.
According to World Bank data, 24% of the adult world population do not have a bank account and this
percentage rises to 29% of the adult population in developing nations. This unbanked population do
not have access to banking and bank fees for remittances to send money cross-border are exorbitant
(i.e. range between 5-30% per transaction). The cross-border remittance of money is a real use case
for developing nations due to people working in developed nations to send money home to families
in developing nations. Cryptocurrencies such as Bitcoin remove the intermediary such as banks
and other financial institutions to allow the unbanked population to keep more of their hard-earned
income and gives them more financial freedom and sovereignty over their money.
In 2023, CoinShares continued its contribution to the Massachusetts Institute of Technology (MIT)
Digital Currency Initiative (DCI). The Group committed to donate US$500,000 over the course of 4
years from 2021 to support Bitcoin open-source software development and advance the security of
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the Bitcoin protocol. This contribution to the initiative supports a growing team of senior, specialised
open-source developers focused on systemic threat mitigation and rigorous improvements to
Bitcoin’s underlying infrastructure, including code audits, increasing automation, and novel research
into Bitcoin’s long-term economic security. CoinShares joined other industry leaders, such as Google
and the Bank of England, as part of a new DCI Guardian’s Circle committed to long-term foundational
funding of open-source development and systemic security improvements to the Bitcoin protocol.
The year of 2023 has been a year of consolidation and risk aversion for the digital assets industry after
the 2022 market events of FTX and Celsius. Risk Management has been high on the agenda for the
Group and we have evidenced this by augmenting the Audit and Risk Committee in terms of its roles
and responsibilities. Also, there has been a more stringent focus on the compliance with national laws
and regulations for the digital assets sector, such as the EU Markets in Crypto Assets (MiCA) adoption.
We see this as a positive step for our industry because this allows improved investor protection and
confidence, which in turn drives further cryptocurrency adoption.
Employee Benefits
The Group strives to provide a competitive salary and benefits package to all eligible employees
according to job requirements, jurisdiction and individual performance. Our employees have the
opportunity to participate in the Group’s success through our incentive programs such as the Equity
Incentive Program (“EIP”), of which all levels of employees are qualified to receive EIP. Employees are
also eligible for consideration for a discretionary bonus annually, the sum of which is determined by
overall company performance. The Group actively monitors the attrition rate of staff (13% voluntary
resignations in 2023) to identify any functional areas of improvement. Exit interviews are conducted
to gain further insights and to improve retention rates. We have in place paid leave and flexibility
schedules where our employees are eligible for paid leave and can benefit from flexible working the
24/7 nature of the digital assets industry.
The benefits package that the Group offers our employees varies from one operating jurisdiction to
another to reflect local market conditions and legislation. Typically, this includes benefits such as a
defined contribution pension plan, medical insurance, income protection/disability insurance and
life insurance provided either via private insurance schemes or social security contributions. In some
locations, there are fitness and wellbeing benefits offered with regular health assessments made
available.
Wellbeing
Employees who utilise a good work-life balance are better equipped for high performance in the work
environment. CoinShares regularly reviews employee benefits against market benchmarks to ensure
they are fit and proper to support staff wellbeing. The Group embraces workforce diversity and promotes
productivity, irrespective of physical and geographical locations. The Group allows colleagues to work
from home and provides other forms of flexible working arrangements designed to protect health and
safety. To consider and accommodate employee requests in an equitable, consistent, and sustainable
manner, the Group has implemented a flexible working application (“FWA”) to allow employees to
work from home depending on the nature of their job, the requirements of the business, and their
own circumstances.
In 2023, the Group set up Social Committees in each jurisdiction order to ensure that there is more
team-based collaboration in an informal setting. The aim of the committee is to improve the employee
networking effects within the organisation and maintain high engagement levels from our employees.
The events organised were inclusive in nature and encouraged participation from all levels across
the organisation. There is a ring-fenced yearly budget allocated to the Social Committees to organise
diverse events and we look forward to such events in the upcoming years also.
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Diversity and Inclusion
CoinShares is committed to promoting a diverse, equal, and inclusive working environment, where
all employees feel valued and respected for who they are and for the work they contribute. The
Group’s Employee handbook outlines the responsibilities of staff in relation to equal opportunities,
diversity and inclusion. We instil the principle of an inclusive workplace culture with zero tolerance
for discrimination or harassment. All harassment is strictly prohibited, and a reporting channel is
provided to employees as a forum where the Group can handle and investigate any potential reports
of harassment. The Group’s Human Resources policies strictly comply with all applicable employee
local laws and regulations. As an equal opportunity employer, the Group is committed to providing
equal opportunities to all employees and applicants. We create a safe working environment of mutual
respect for employees that values individual contribution and recognises diversity. CoinShares
upholds local laws on protecting staff from discrimination. We pride ourselves on being a meritocracy
where each person is evaluated based on personal skill and merit. Moreover, the Group prohibits the
use of child labour and forced or compulsory labour at all its units and suppliers.
Learning and Development
CoinShares seeks to establish a workplace that provides continuous learning to employees to equip
them with effective skills, knowledge, and training to meet their full potential. The Group provides
new joiners with a comprehensive induction training to ensure new employees clearly understand the
Group’s values and culture and efficiently integrate into the working culture. The induction programme
provides information on the Group’s structure, an introduction to the different departments of the
Group, an overview of company policies and procedures and other important HR-related activities.
Also, the induction offers training on CoinShares’ compliance and cyber security policies and
procedures.
CoinShares also provides annual training as part of the Continuing Professional Development (“CPD”)
scheme to employees on financial industry ethics, compliance, anti-money laundering, insider
trading, conflicts of interest, diversity and inclusion, information security and cyber risk awareness.
The courses are administered and tracked by the Compliance and Human Resources teams.
CoinShares supported our Company Personnel when external courses were held. CoinShares
supported a number of employees to obtain their Chartered Financial Analyst (CFA) qualifications
across Levels 1, 2 and 3, Investment Management Certificates, ACCA and CGI IFA qualifications. All
personnel were given time off to attend the examinations, additional study days and financial support to
access extra study materials. Our most recent successes were individual employees completing their
CFA Level 1 and their Investment Management Certificate respectively. In addition to the professional
qualification support, CoinShares offers all staff access to online training via the platform provider
Coursera in a wide range of programmes from financial management for non-finance managers to
leadership and development and Python programming.
Industry Leadership
We provide deep and thought-provoking research into the digital assets industry utilising our
subject matter experts in the Research department. Our research is aimed at a wide spectrum of
cryptocurrency amateurs, enthusiasts, and institutional investors. We have published research on
the impact of crypto mining, promoting the usage of efficient and renewable energy in crypto mining
technology. CoinShares has explored opportunities to invest in renewable power generation in
underutilised globally distributed locations for optimisation of energy usage in the crypto ecosystem.
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External Community
We look for opportunities where CoinShares can have a meaningful impact, with a focus on preserving
local culture. We collaborate with community non-profit organisations, neighbourhood groups, and
other special initiatives for local residents.
In 2023, a cohort of London office employees volunteered in a Corporate Social Responsibility Day
where an afternoon was spent helping the local Queen’s Park London community clearing and cleaning
local gardens in community hubs, nursing homes and private residences of the elderly. This was a
positive action for CoinShares that showcased our support for the local community and supporting
greener initiatives as part of our ESG strategy. Our employee volunteers enjoyed the gardening day
in the summer sun and this allowed for an informal team building activity. A donation of £250 to the
Queen’s Park Community Council was made as part of our efforts.
In Jersey, our CoinShares Chairman committed a donation of £500 to the Healing Waves foundation.
Healing Waves enables individuals despite their condition and/or disability both neurological and
physical to access the ocean in a safe way to participate in water sport activities around the shores
of Jersey. Healing Waves firmly believes that being in, under, on, or around the water leaves oneself
calmer with a more focused mindset, it can give one’s mind a break from the usual busyness and over
stimulation of life and the foundation truly believes the water can do the same for any of the Jersey
community who participates.
We are proud to fund a three-year title sponsorship of the Jersey Race Club, the club which dates
back to 1832, and where horse racing has continued in one form or another with the exception of the
two world wars and the 2020 season. The sponsorship provides the financial support required for the
Club to continue to host local horse racing events, affecting both local and off-Island jobs amongst
jockeys, trainers, stable personnel and catering. As horse racing is a regulated sport, the welfare of its
human and equine participants is considered integral to the Club. The Club meticulously treats and
cares for its horses by employing its team of expert stablemen, the provision of vets and other welfare
professionals.
In the London office, office desk usage was given at no cost to charity workers from the Horseferry
Foundation. The foundation’s activities include the advancement of education, and the protection and
conservation of the environment for the benefit of children and young people.
We intend to continue contributing to the global crypto community via research, events, and advocacy
throughout 2024 and beyond and look forward to reporting on these efforts.
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AUDITED FINANCIAL
STATEMENTS
CONTENTS
Company Information
Directors’ Report
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Alternative Consolidated Statement of Comprehensive Income
Notes to the Consolidated Financial Statements
55
57
59
66
67
68
69
71
73
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COMPANY INFORMATION
CoinShares International Limited
Jersey
102185
2nd Floor
2 Hill Street
St Helier
Jersey
JE2 4UA
Daniel Masters
Jean-Marie Mognetti
Carsten Køppen
Johan Lundburg
Viktor Fritzén
Christine Rankin
CoinShares Corporate Services (Jersey) Limited
Baker Tilly Channel Islands Limited
PO Box 437
2nd Floor, Lime Grove House
Green Street
St Helier, Jersey
JE2 4UB
Silvergate Bank (closed March 2023)
4250 Executive Square
Suite 300
La Jolla
CA 92037
Deltec Bank & Trust Limited
Deltec House
Lyford Cay
PO Box N-3229
Nassau
The Bahamas
Flagstar Bank (formerly Signature Bank) (closed May 2023)
565 Fifth Avenue
New York
NY 10017
DBS Bank Ltd
12 Marina Boulevard
Singapore
018982
Barclays Bank
13 Library Place
Jersey
JE4 8NE
Handelsbanken
Kungsträdgårdsgatan 2
106 70 Stockholm
The Company
Jurisdiction
Registered Number
Registered Office
Directors
Company Secretary
Independent Auditor
Bankers
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Silicon Valley Bank, a division of First-Citizens Bank & Trust Company
3003 Tasman Dr
Santa Clara
CA 95054
Banque Populaire
76 Avenue France
75013 Paris
France
FlowBank S.A
Esplanade de Pont-Rouge 6,
1211 Geneva 26
Switzerland
Customers Bank (from May 2023)
Rye Ridge Shopping Center
102 South Ridge Street
Rye Brook
New York
10573
Komainu Digital
3rd Floor
2 Hill Street
St Helier
Jersey
JE2 4UA
Zodia Custody Limited
Thomas House
84 Eccleston Squares
London SW1V 1PX
Carey Olsen Jersey LLP
47 Esplanade
St Helier
Jersey
JE1 0BD
Marex Prime Services Limited (formerly Cowen International Limited)
155 Bishopsgate
London EC2M 3TQ
Interactive Brokers LLC
110 Bishopsgate
London EC2N 4AY
Mangold Fondkommission AB
Engelbrektsplan 2
114 34 Stockholm
Marex Capital Markets Inc.
425 S Financial Place, Suite 1850
Chicago
IL 60605
BMO Capital Markets Ltd
100 Liverpool Street
London EC2M 2AT
LMAX Broker Ltd.
1A Nicholas Road
London W11 4AN
Custodians
Legal Advisor
Brokers
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DIRECTORS’ REPORT
The directors present their annual report and the consolidated financial statements (the ‘financial
statements’) of CoinShares International Limited (the ‘Company’), together with its subsidiaries listed
in note 15(a) of the financial statements (collectively the ‘Group’), for the year ended 31 December 2023.
Incorporation
The Company is incorporated and domiciled in Jersey. The Company is registered as a public company
with the Jersey Financial Services Commission and listed on Nasdaq Stockholm.
Principal activity
The principal activity of the Group is to engage in creating financial products associated with digital
assets and blockchain technology.
Results and dividends
The total comprehensive income for the year amounted to £38,396,035 (2022: £2,934,267). The
loss for the year, after taxation and excluding movements on digital assets recognised through other
comprehensive income, amounted to £453,773,006 (2022: profit of £520,216,064).
Dividends of £nil (2022: £nil) were declared or payable in the year. A share buy-back program
undertaken during the year resulted in the buyback of 1,597,706 shares (2022: 78,396) for consideration
of £4,216,180 (2022: £228,383). The share buyback program was implemented for the purpose of
reducing the capital of the Company.
Following the financial year end, the Company announced the adoption of a dividend policy under
which approximately 20% to 40% of the annual total comprehensive income (adjusted for FX on
consolidation through other comprehensive income) is to be distributed as a dividend annually. A
dividend is therefore expected in the next financial period.
Statement of directors’ responsibilities
The directors are responsible for preparing the Directors’ Report and financial statements in
accordance with applicable laws and regulations.
The Companies (Jersey) Law 1991 requires the directors to prepare financial statements for each
financial year. Under that law the directors have elected to prepare the Group financial statements in
accordance with UK-adopted International Financial Reporting Standards. Under company law the
directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted International Financial Reporting Standards have
been followed, subject to any material departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Group and company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group and Company’s transactions and disclose with reasonable accuracy at any time
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the financial position of the Group and Company, and which enable them to ensure that the financial
statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding
the assets of the Group and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in Jersey governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Directors
The directors who held office during the year and subsequently are set out on page 55.
Company Secretary
The Company Secretary who held office during the year and subsequently is set out on page 55.
Going concern
The Group had net assets of £239,245,005 (2022: £203,741,110) and total comprehensive income of
£38,396,035 (2022: £2,934,267). The directors have prepared these financial statements on a going
concern basis on the understanding that they have satisfied themselves that sufficient working capital
will be available for 12 months from the date of issue of these financial statements.
The Group has an obligation to settle amounts due to investors for Exchange Traded Products (‘ETP’)
that reference the performance of specific digital assets issued. As the Group holds hedging assets
in excess of this liability, the directors consider that they will be able to convert digital assets to fiat
currency so as to settle the obligations in the event that certificates are redeemed and so deem the
going concern risk associated with these certificates to not be material. In addition, delays in the
settlement of the certificates may be imposed or certain modifications be made in the occurrence of
market illiquidity or other disruptions.
Furthermore, the directors deem the cyber security of the Group to be sufficient to mitigate cyber risk
and the risk of theft of digital assets that could potentially leave the Group unhedged and exposed in
its obligation to certificate holders.
Accordingly, the directors have prepared the financial statements on a going concern basis.
Post balance sheet events
Events subsequent to the year end have been disclosed in note 17.
Independent auditor
In accordance with the Company’s articles, a resolution proposing that Baker Tilly Channel Islands
Limited be reappointed as auditor of the Group will be put at the Annual General Meeting on 31 May
2024.
The report was approved by the board on 29 April 2024 and signed on its behalf.
...........................................................
Jean-Marie Mognetti
Director
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INDEPENDENT AUDITOR’S REPORT
To the Members of CoinShares International Limited
Opinion
We have audited the consolidated financial statements of CoinShares International Limited (the
“Company” and, together with its subsidiaries, the “Group”), which comprise the consolidated
statement of financial position as at 31 December 2023, and the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, and notes to the consolidated financial statements, including
material accounting policy information.
In our opinion, the accompanying consolidated financial statements:
• give a true and fair view of the consolidated financial position of the Group as at 31
December 2023, and of its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with IFRS Accounting Standards
as adopted by the United Kingdom (IFRSs); and
• have been prepared in accordance with the requirements of the Companies
(Jersey) Law 1991, as amended.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group and Company in accordance with the ethical requirements that are relevant
to our audit of the Consolidated Financial Statements in Jersey, including the FRC’s Ethical Standard,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
<G
bakertilly
CHANNEL ISLANDS
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Key audit maer How our audit addressed
the maer
Key observaons
communicated to those
charged with governance
Valuaon of investments
There is a risk that
investments could be
materially misstated and
incorrectly disclosed in
the consolidated financial
statements.
• Total value:
£44,924,207 (2022:
£45,011,850)
• As disclosed in note 9.
We understood and evaluated the valuaon
methodology applied with reference to the
Internaonal Private Equity and Venture
Capital Valuaon guidelines (IPEV), and
tested the techniques used by the Directors
in determining the fair value of material
unquoted investments. To test the value we
undertook the following:
• Assessed the appropriateness of the
valuaon methodology used and tested
the inputs either through validaon
to appropriate third party sources,
or where relevant, assessed the
reasonableness of significant esmates
and judgements used;
• Compared valuaons of investments
in funds to the most recent audited
financial statements, where available;
• Compared valuaons to recent
transacons, where relevant; and
• Compared valuaons to recent
investments made in investee
companies where there was a
significant new investor.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
Existence and rights and
obligaons in respect of
investments
There is a risk that
investments do not exist,
or the group does not hold
tle to the investments.
• Total value:
£44,924,207 (2022:
£45,011,850)
• As disclosed in note 9.
For each material investment held by
the Group we have obtained third party
confirmaon of ownership.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
Digital asset: Existence,
Rights and Obligaons
There is a risk that the
Group does not own or
control the digital assets
which would result in a
material misstatement in
the consolidated financial
statements.
• Total value:
£2,377,652,328
• (2022: £869,034,495)
• As disclosed in note 8.
Our substanve procedures included
performing the following:
• Obtained confirmaons from the
custodian and centralised exchanges,
where available;
• Performed on-chain tesng where
wallets were directly held;
• Performed a stocktake of digital assets
held via decentralised wallets; and
• We understood and evaluated the
procedures relang to the process of
assessing the reliability of the custodian
both at take on and throughout the
relaonship.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
COINSHARES
2023 ANNUAL
REPORT
61 | 135
01
02
03
04
05
06
07
08
Key audit maer How our audit addressed
the maer
Key observaons
communicated to those
charged with governance
Digital assets – Valuaon
There is a risk that the
value aached to the
digital assets is materially
misstated.
• Total value:
£2,377,652,328
• (2022: £869,034,495)
• As disclosed in note 8.
We have obtained prices used in the
valuaon and compared to a third-party
source to determine the reasonableness
of the price and the level which has been
applied.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
ETP liabilies:
Completeness, Rights
and Obligaons
There is a risk that the
ETP liability is not fully
recognised which would
materially misstate the
consolidated financial
statements.
• Total value:
£2,351,475,523 (2022:
£986,707,490)
• As disclosed in note 9.
We have obtained confirmaons from the
relevant third pares who issue the ETP
liability cerficates and compared this to
the financial records to ensure the liabilies
exist.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
ETP liability – Valuaon
There is a risk that the
value aached to the
ETP liability is materially
misstated.
• Total value:
£2,351,475,523 (2022:
£986,707,490)
• As disclosed in note 9.
The valuaon of the cerficates has been
tested by:
• Recompung the underlying digital
asset allocaon as per the prospectus;
and
• Comparing prices used in the valuaon
of underlying digital assets to third party
sources to determine reasonableness.
No issues were idenfied
that were required to be
communicated to those
charged with governance.
COINSHARES
2023 ANNUAL
REPORT
62 | 135
01
02
03
04
05
06
07
08
Our Application of Materiality
Materiality for the consolidated financial statements as a whole was set at £7,163,000 (2022: £6,112,000),
determined with reference to a benchmark of net assets, of which it represents 3% (2022: 3%).
In line with our audit methodology, our procedures on individual account balances and disclosures
were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level
the risk that individually immaterial misstatements in individual account balances add up to a material
amount across the consolidated financial statements as a whole.
Performance materiality was set at 60% (2022: 60%) of materiality for the consolidated financial
statements as a whole, which equates to £4,297,800 (2022: £3,667,200). We applied this percentage in
our determination of performance materiality because we deem the digital asset activities undertaken
by the Group to be high risk.
We reported to the Audit Committee any uncorrected omissions or misstatements exceeding
£358,000 (2022: £305,600), in addition to those that warranted reporting on qualitative grounds.
Of the Group’s 29 (2022: 19) reporting components, including the Company, we subjected 4 (2022:
4) to full scope audits. The work on all the components was performed by the Group audit team. The
components within the scope of our audit accounted for 90% (2022: 94%) of the Group’s net assets.
Conclusions relating to Going Concern
In auditing the consolidated financial statements, we have concluded that the Directors’ use of the
going concern basis of accounting in the preparation of the consolidated financial statements is
appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the Group and
Company’s ability to continue as a going concern for a period of at least twelve months from when the
consolidated financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
Other Information
The other information comprises the information included in the annual report other than the
consolidated financial statements and our auditor’s report thereon. The Directors are responsible for
the other information contained within the annual report. Our opinion on the consolidated financial
statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the course of
the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the consolidated financial statements themselves. If, based on the work performed,
we conclude that there is a material misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
--
COINSHARES
2023 ANNUAL
REPORT
63 | 135
01
02
03
04
05
06
07
08
Matters on which we are required to Report by Exception
In the light of the knowledge and understanding of the Group and its environment obtained in the
course of the audit, we have not identified material misstatements in the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies
(Jersey) Law 1991, as amended, requires us to report to you if, in our opinion:
• proper accounting records have not been kept;
• proper returns adequate for the audit have not been received from branches not visited by us;
• the consolidated financial statements are not in agreement with the accounting records and
returns; or
• we have not obtained all information and explanation that, to the best of our knowledge and
belief, was necessary for the audit.
Responsibilities of the Directors
As explained more fully in the Directors’ responsibilities statement set out on page 57, the Directors
are responsible for the preparation of consolidated financial statements that give a true and fair view
in accordance with IFRSs, and for such internal control as the Directors determine is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless management either intends
to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Directors are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these consolidated financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed
below:
• Enquiry of management to identify any instances of non-compliance with laws and regulations,
including actual, suspected or alleged fraud;
• Reading minutes of meetings of the Board of Directors;
• Review of legal invoices;
• Review of management’s significant estimates and judgements for evidence of bias;
• Review for undisclosed related party transactions;
• Obtained the revenue calculation and recalculated revenue for the year based on underlying
support;
• Using analytical procedures to identify any unusual or unexpected relationships; and
• Undertaking journal testing, including an analysis of manual journal entries to assess whether
there were large and/or unusual entries pointing to irregularities, including fraud.
--
COINSHARES
2023 ANNUAL
REPORT
64 | 135
01
02
03
04
05
06
07
08
A further description of the auditor’s responsibilities for the audit of the financial statements is located
at the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Report on the examination of the ESEF report
Opinion
In addition to our audit of the annual report, we have also examined that the Board of Directors have
prepared the annual report in a format that enables uniform electronic reporting (the ESEF report)
pursuant to Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528) for CoinShares
International Limited for the year ended 31 December 2023.
Our examination and our opinion relate only to the statutory requirements.
In our opinion, the ESEF report has been prepared in a format that, in all material respects, enables
uniform electronic reporting.
Basis for opinion
We conducted our examination in accordance with International Standard on Assurance Engagements
(UK) 3000 Assurance Engagements Other Than Audits Or Reviews of Historical Financial Information.
Our responsibilities under those standards are further described in the Auditor’s responsibilities
section of our report. We are independent of the Company in accordance with the ethical requirements
that are relevant in Jersey, including the FRC’s Ethical Standard, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of the Board of Directors
The Board of Directors is responsible for the preparation and fair representation of the ESEF report
in accordance with Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for
such internal control as the Board of Directors determines is necessary to enable the preparation of
the ESEF report that is free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the ESEF report is in all material
respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish
Securities Market Act (2007:528), based on the procedures performed. Reasonable assurance is a
high level of assurance, but it is not a guarantee that an engagement carried out in accordance with
ISAE (UK) 3000 will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the ESEF report.
We apply ISQM (UK) 1 Quality Management for Firms that Perform Audits or Reviews of Financial
Statements, Or Other Assurance Or Related Services Engagements and accordingly we maintain
a comprehensive system of quality management, including documented policies and procedures
regarding compliance with professional ethical requirements, professional standards and legal and
regulatory requirements.
The examination involves obtaining evidence, through various procedures selected using our
judgement, that the ESEF report has been prepared in a format that enables uniform electronic
reporting of the annual report.
COINSHARES
2023 ANNUAL
REPORT
65 | 135
01
02
03
04
05
06
07
08
The examination included:
• Consideration of those elements of internal control that are relevant to the preparation of the
ESEF report by the Board of Directors;
• Evaluating that the ESEF report has been prepared in a valid format; and
• Reconciling the ESEF report with the audited annual report.
Auditor’s report on the Board of Directors Report, Corporate Governance Report and
Sustainability Report
Based on our audit of the consolidated financial statements as described above, it is our opinion
that the information presented in the Board of Directors Report, Corporate Governance Report
and Sustainability Report concerning the financial statements and the going concern assumption
is consistent with the consolidated financial statements and complies with the applicable laws and
regulations.
Other Matters which we are Required to Address
We were appointed by the Board of Directors on 26 August 2020 to audit the consolidated financial
statements. Our total uninterrupted period of engagement covers 5 financial reporting periods.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group and
we remain independent of the Group in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee in accordance with
ISAs.
Use of this Report
This report is made solely to the Members of the Company, as a body, in accordance with Article 113A
of the Companies (Jersey) Law 1991, as amended. Our audit work has been undertaken so that we
might state to the Members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and its Members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Ewan Spraggon
For and on behalf of Baker Tilly Channel Islands Limited
Chartered Accountants
St Helier, Jersey
Date: 29 April 2024
--
66 | 135
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 £ 2022 £
Revenue
4(a)
43,082,721
51,336,682
Cost of sales 6(a)
(7,251,466)
(8,667,090)
Gross profit 35,831,255
42,669,592
Administrative expenses 6(b)
(21,392,505)
(23,832,952)
Other operating income 4(b)
23,447,347
16,626,978
Gain/(loss) on digital assets 8
787,050,987
(1,226,595,255)
(Loss)/gain on certificate liability 9(f)
(1,470,485,132)
2,370,899,189
Other operating gains/(losses) through profit and loss 9
188,837,891
(629,754,694)
Operating (loss)/profit (456,710,157)
550,012,858
Impairment reversals/(charges) 9(h),10(c)
60,160
(31,064,551)
Fair value gain/(loss) on investments through profit and loss 9(d)
11,365,752
(2,800,424)
Share of losses in joint ventures/associates 9(d,e)
(10,590,566)
(2,149,611)
Finance costs 6(c)
(6,902,019)
(6,330,425)
Finance income 6(c)
10,224,023
12,916,891
(Loss)/profit before tax (452,552,807)
520,584,738
Taxation 7
(573,670)
(368,674)
(Loss)/profit after tax (453,126,477)
520,216,064
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
(8,192,795)
19,281,832
(8,192,795)
19,281,832
Items that will not be reclassified subsequently to profit or loss
Fair value gain/(loss) on digital assets 8
499,566,125
(539,108,506)
Fair value gain on financial assets through other comprehensive income
149,182
2,544,877
499,715,307
(536,563,629)
Total other comprehensive income/(loss) 491,522,512
(517,281,797)
Total comprehensive income 38,396,035
2,934,267
Adjusted earnings per share
Basic 21
0.57
0.04
Diluted 21
0.54
0.04
The notes on pages 73 to 134 are an integral part of these financial statements
67 | 135
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
Note 2023 £ 2022 £
ASSETS
Non-current assets
Property, plant and equipment 10(a)
3,065,552
1,935,862
Digital assets 8
1,331,614
111,978
Goodwill 10(c)
941,507
943,484
Other intangible assets 10(d)
9,716,511
11,048,448
Investments 9(d)
25,110,879
14,607,956
Investments in joint ventures and associates 9(d,e)
19,813,328
30,403,894
Trade and other receivables 9(a)
328,614
806,052
Other non-current assets 9(b)
2,211,742
1,968,199
62,519,747
61,825,873
Current assets
Cash and cash equivalents 9(c)
25,507,944
134,768,902
Trade and other receivables 9(a)
2,241,203
1,458,179
Digital assets 8
2,375,850,359
868,922,517
Other current assets 9(b)
266,093,775
177,565,926
2,669,693,281
1,182,715,524
Total assets 2,732,213,028
1,244,541,397
LIABILITIES
Current liabilities
Certificate liability 9(f)
(2,351,475,523)
(986,707,490)
Amounts due to brokers 9(c)
(669,402)
-
Trade and other payables 9(g)
(5,612,218)
(3,969,783)
Other current liabilities 9(i)
(108,940,878)
(27,116,746)
Current lease liabilities 10(b)
(563,633)
(1,307,507)
Current tax liabilities 7
(156,970)
(235,814)
(2,467,418,624)
(1,019,337,340)
Net current assets 202,274,657
163,378,184
Non-current liabilities
Non-current lease liabilities 10(b)
(2,404,272)
(28,980)
Non-current loans 9(i)
(23,145,127)
(21,433,967)
(25,549,399)
(21,462,947)
Total liabilities (2,492,968,023)
(1,040,800,287)
Net assets 239,245,005
203,741,110
EQUITY
Share capital 11(a)
33,667
33,766
Share premium 11(a)
30,690,938
30,781,210
Other reserves 11(b)
454,110,087
22,136,272
Retained earnings
(245,589,687)
150,789,862
Total equity 239,245,005
203,741,110
The notes on pages 66 to 134 are an integral part of these financial statements.
.............................................
Jean-Marie Mognetti
Director
Date: 29 April 2024
The financial statements on pages 66 to 134 were approved and authorised for issue by the board of directors and signed on its behalf by:
68 | 135
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share
capital £
Share
premium £
Other
reserves £
Retained
earnings £
Total
equity £
At 31 December 2021 33,766 30,781,210 (2,797,090,363) 2,966,288,540 200,013,153
Profit for the year - - - 520,216,064
520,216,064
Other comprehensive loss for the year - - (519,826,674) 2,544,877
(517,281,797)
Total comprehensive income - - (519,826,674) 522,760,941 2,934,267
Share based payments - - 1,229,617 -
1,229,617
Share buybacks - - (228,383) -
(228,383)
Share options liquidated - - (153,900) (53,644)
(207,544)
Total transactions with owners
recognised in equity
- - 847,334 (53,644) 793,690
Transfer of revaluation reserve upon
disposal of digital assets
- - 3,338,205,975 (3,338,205,975)
-
Total other changes in equity - - 3,338,205,975 (3,338,205,975) -
At 31 December 2022 33,766 30,781,210 22,136,272 150,789,862 203,741,110
Loss for the year - - - (453,126,477)
(453,126,477)
Other comprehensive income for the
year
- - 491,522,512 -
491,522,512
Total comprehensive income - - 491,522,512 (453,126,477) 38,396,035
Share based payments - - 1,324,818 -
1,324,818
Share cancellations (99) (90,272) 551,399 (461,028)
-
Share buybacks - - (4,216,180) -
(4,216,180)
Share options exercised/liquidated - - (20,610) 19,832
(778)
Total transactions with owners
recognised in equity
(99) (90,272) (2,360,573) (441,196) (2,892,140)
Transfer of revaluation reserve upon
disposal of digital assets
- - (57,188,124) 57,188,124
-
Total other changes in equity - - (57,188,124) 57,188,124 -
At 31 December 2023 33,667 30,690,938 454,110,087 (245,589,687) 239,245,005
The notes on pages 73 to 134 are an integral part of these financial statements.
69 | 135
CONSOLIDATED STATEMENT OF CASH FLOWS (1/2)
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 £ 2022 £
Cash flows from operating activities
(Loss)/profit after (453,126,477)
520,216,064
Adjustments for:
- Depreciation of property, plant and equipment 10(a)
201,619
240,683
- Depreciation of right-of-use assets 10(a)
1,211,439
872,526
- Impairment of goodwill 10(c)
-
5,473,525
- Amortisation of other intangible assets 10(d)
1,789,875
1,769,632
- Share-based payment expense 20
1,324,818
1,229,617
- Finance and other income 6(c)
(10,224,023)
(12,916,891)
- Finance costs and other expenses 6(c)
6,902,019
6,330,425
- Income tax expense 7
573,670
368,674
- Other operating (gains)/losses through profit and loss 8
(188,837,891)
629,754,694
- Loss/(gain) on certificate liability 9(f)
1,470,485,132
(2,370,899,189)
- (Gain)/loss on digital assets 8
(787,050,987)
1,230,310,948
- (Gain)/loss on investments 9(d)
(11,365,752)
2,800,424
- Share of joint venture losses 9(d,e)
-
230,910
- Share of associate losses 9(d,e)
10,590,566
1,918,701
- Gain on foreign exchange
(3,156,213)
-
- Other operating income/gains 4(b)
(22,195,819)
-
- Trading expenses 6(a)
119,206
-
17,241,182
17,700,743
Changes in working capital:
- Trade receivables and other assets 9(a)
82,860,609
683,948,708
- Trade payables and other liabilities 9(g)
651,049
(502,361,951)
100,752,840
199,287,500
Changes in operating activities:
- Net (purchases)/sales of digital assets
(62,412,704)
381,400,078
- Net sales of ETP liabilities
(137,854,204)
(269,332,298)
Cash (used in)/generated from operations
(99,514,068)
311,355,280
Finance costs paid 6(c)
(6,614,612)
(6,329,290)
Income taxes paid 7
(650,644)
(3,457,543)
Net cash flow (used in)/generated from operating activities (106,779,324)
301,568,447
Cash flows from investing activities
Purchases of other intangible assets 10(d)
(845,056)
(703,461)
Disposals of other intangible assets 10(d)
(282,287)
6,828
Purchases of property, plant and equipment 10(a)
162,806
(327,508)
Disposals of property, plant and equipment 10(a)
-
196,187
Acquisition of investments in associates 9(d,e)
-
(20,266,689)
Acquisition of other investments through profit and loss 9(d)
(426,917)
(28,520)
Net disposals of listed equities
-
98,578
Finance income 6(c)
8,299,340
12,957,913
Net cash generated/(used in) from investing activities 6,907,886
(8,066,672)
70 | 135
CONSOLIDATED STATEMENT OF CASH FLOWS (2/2)
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 £ 2022 £
Cash flows from financing activities
(Repayment)/issue of long term loan 9(i)
(61,488)
21,573,387
Repayment of lease liabilities 10(b)
(588,487)
(1,065,080)
Cash payments for the interest portion of lease liabilities 10(b)
(77,866)
(14,217)
Share option liquidations 11(b)
(14,307)
(207,544)
Share buybacks 11(b)
(3,651,252)
(228,383)
Net cash (used in)/generated from financing activities (4,393,400)
20,058,163
Net (decrease)/increase in cash and cash equivalents (104,264,838)
313,559,937
Cash and cash equivalents
At the beginning of the year
134,768,902
(162,955,669)
Effects of currency translation on cash and cash equivalents
(5,665,521)
(15,835,366)
At the end of the year
9(c)
24,838,542
134,768,902
Cash and cash equivalents comprise
Cash at bank
6,660,753
26,567,599
Amounts due from brokers
16,270,974
98,128,995
Amounts due to brokers
(669,402)
-
Amounts due from exchanges
2,576,217
10,072,308
At the end of the year 24,838,542
134,768,902
The notes on pages 73 to 134 are an integral part of these financial statements.
71 | 135
ALTERNATIVE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The alternative presentation of the SOCI is designed to reflect the performance of the Group if gains and losses on digital assets are exclusively
taken through profit and loss, rather than through other comprehensive income as required by UK-adopted IFRS accounting standards. No
other adjustments have been made.
Due to the treatment of digital assets as intangible assets and the resultant impact on the Group’s other comprehensive income, it is the
opinion of management that total comprehensive income is the most representative measure of the Group’s overall performance.
2023 £ 2022 £
Revenue 43,082,721
51,336,682
Cost of sales
(7,251,466)
(8,667,090)
Gross profit 35,831,255
42,669,592
Administrative expenses
(21,392,505)
(23,832,952)
Other operating income
23,447,347
16,626,978
Gain/(loss) on digital assets
1,286,617,122
(1,765,703,761)
(Loss)/gain on certificate liability
(1,470,485,132)
2,370,899,189
Other operating losses through profit and loss
188,837,891
(629,754,694)
Operating profit/(loss) 42,855,968
10,904,352
Impairment charges
60,160
(31,064,551)
Fair value gain/(loss) on investments through profit and loss
11,365,752
(2,800,424)
Share of losses in joint ventures/associates
(10,590,566)
(2,149,611)
Finance costs
(6,902,019)
(6,330,425)
Finance income
10,224,023
12,916,891
Profit/(loss) before tax 47,013,318
(18,523,768)
Taxation
(573,670)
(368,674)
Profit/(loss) after tax 46,439,648
(18,892,442)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
(8,192,795)
19,281,832
(8,192,795)
19,281,832
Items that will not be reclassified subsequently to profit or loss
Fair value gain on financial assets through other comprehensive income
149,182
2,544,877
149,182
2,544,877
Total other comprehensive (loss)/income (8,043,613)
21,826,709
Total comprehensive income 38,396,035
2,934,267
Earnings per share
Basic
0.57
0.04
Diluted
0.54
0.04
The notes on pages 73 to 134 are an integral part of these financial statements.
COINSHARES
2023 ANNUAL
REPORT
72 | 135
01
02
03
04
05
06
07
08
CONTENTS TO THE NOTES
TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. General information and material accounting policies
2. Significant changes in the current reporting period
Numerical information - Statement of Comprehensive Income
3. Operating segment information
4. Revenue and other income
5. Material profit or loss items
6. Other income and expense items
7. Income tax expense
Numerical information - Statement of Financial Performance
8. Digital assets
9. Financial assets and liabilities
10. Non-financial assets and liabilities
11. Equity
Risk
12. Critical estimates, judgements and errors
13. Financial risk and capital management
Group Structure
14. Business combination
15. Interests in other entities
Contingent items
16. Commitments
17. Events occurring after the reporting period
Further details
18. Cash flow information
19. Related party transactions
20. Share-based payments
21. Earnings per share
22. Summary of other accounting policies
73
75
77
78
79
79
81
83
87
101
109
111
111
118
119
121
122
124
125
127
130
131
--
COINSHARES
2023 ANNUAL
REPORT
73 | 135
01
02
03
04
05
06
07
08
1. General information and material accounting policies
CoinShares International Limited (the ‘Company’) and its subsidiaries (together the ‘Group’) primarily
operates in Jersey, Channel Islands (see note 15(ii) for other jurisdictions in which the Group operates).
The principal activity of the Group is providing exposure to the digital asset ecosystem via a range of
financial products and services, supported by its technology stack and team.
The Company is a public company limited by shares and is incorporated and domiciled in Jersey. The
address of its registered office is 2nd Floor, 2 Hill Street, St Helier, Jersey JE2 4UA.
These notes form an integral part of and should be read in conjunction with the accompanying
consolidated financial statements (the ‘financial statements’).
The material accounting policies of the Group are disclosed below. Policies impacting upon specific
areas of the accounts are included within the relevant section of the notes to the financial statements.
(a) Basis of preparation
These financial statements have been prepared under the historical cost convention unless otherwise
specified within these accounting policies and in accordance with UK-adopted International Financial
Reporting Standards (‘IFRS’) and the Companies (Jersey) Law 1991.
The financial statements are presented in Pound Sterling, which is also the functional currency.
Monetary amounts in these financial statements are rounded to the nearest pound, except when
otherwise indicated.
The preparation of financial statements in compliance with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise judgement in applying the Group
accounting policies.
The following material accounting policies have been applied:
(b) Separate financial statements
Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of a holding company need
not prepare separate financial statements. Accordingly, these financial statements present the results
of the Group headed by the Company.
(c) Going concern basis
The Group had net assets of £239,245,005 (2022: £203,741,110), an operating loss of £457,356,686
(2022: operating profit of £550,012,858), and total comprehensive income of £38,396,035 (2022:
£2,934,267). The directors have prepared these financial statements on a going concern basis on the
understanding that they have satisfied themselves that sufficient working capital will be available for
12 months from the date of issue of these financial statements.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
--
COINSHARES
2023 ANNUAL
REPORT
74 | 135
01
02
03
04
05
06
07
08
The Group has an obligation to settle amounts due to investors for Exchange Traded Products (‘ETP’)
that reference the performance of specific digital assets issued. As the Group holds hedging assets
in excess of this liability, the directors consider that they will be able to convert digital assets to fiat
currency so as to settle the obligations in the event that certificates are redeemed and so deem the
going concern risk associated with these certificates to not be material. In addition, delays in the
settlement of the certificates may be imposed or certain modifications be made in the occurrence of
market illiquidity or other disruptions.
Furthermore, the directors deem the cyber security of the Group to be sufficient to mitigate cyber risk
and the risk of theft of digital assets that could potentially leave the Group unhedged and exposed in
its obligation to certificate holders.
Accordingly, the directors have prepared the financial statements on a going concern basis.
(d) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is
achieved when the Group:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affects its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control listed above.
When the Group has less than a majority of the voting rights of an investee, it considers that it has
power over the investee when the voting rights are sufficient to give it the practical ability to direct the
relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances
in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power,
including:
• the size of the Group’s holding of voting rights relative to the size and dispersion of holdings
of the other vote rights;
• potential voting rights held by the Group, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Group has, or does not have,
the current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Specifically, the results of subsidiaries acquired or
disposed of during the year are included in profit or loss from the date the Group gains control until
the date when the Group ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used into line with the Group’s accounting policies. All intragroup assets and
liabilities, equity, income, expenses and cash flows relating to transactions between the members of
the Group are eliminated on consolidation.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted
for as equity transactions. The carrying amount of the Group’s interests are adjusted to reflect the
changes in their relative interests in the subsidiaries.
--
COINSHARES
2023 ANNUAL
REPORT
75 | 135
01
02
03
04
05
06
07
08
When the Group loses control of a subsidiary, the gain or loss on disposal recognised in profit or loss
is calculated as the difference between (i) the aggregate of the fair value of the consideration received
and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including
goodwill), less liabilities of the subsidiary. All amounts previously recognised in other comprehensive
income in relation to that subsidiary are accounted for as if the Group had directly disposed of the
related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another
category of equity as required/permitted by applicable IFRS Standards).
2. Significant changes in the current reporting period
The financial position and performance of the Group was particularly affected by the following events
and transactions during the reporting period:
• The performance of the Group is closely related to the performance of the industry within which
it operates, and specifically digital asset prices. As at the beginning of 2023, Bitcoin and Ethereum
were valued at US$16.6k and US$1.2k, respectively. These prices were the result of fairly consistent
decline over the course of 2022, exacerbated by a handful of events that had a detrimental impact
on the industry, such as the failure of FTX exchange in November 2022. However, over the course
of 2023 there has been a strong recovery, with prices for Bitcoin and Ethereum closing the year at
US$42.2k and US$2.3k respectively. This recovery has had an impact on the Group’s AUM held
in respect of its XBTP and CoinShares Physical products which manifests as both an increase in
digital asset holdings and certificate liability. This is the main driver behind the gross asset position
of the Group rising 119% from £1.24 billion to £2.73 billion over the course of 2023.
• The increased value of the assets held has led to strong management fees in the year (which
manifest within the Group’s revenues) and an increase in staking rewards (which manifest within
the Group’s other operating income).
• Following certain exceptional losses incurred in 2022, there has been a focus internally on
counterparty monitoring, cyber security and general governance in order to mitigate the risk of
any trading losses. There have been no such events over the course of 2023. This, coupled with
a focus on stable expenses, has resulted in a total comprehensive income figure far in excess of
that generated in 2022.
• The recovery seen during 2023 has also had a positive impact on the Group’s investments, with
a number being the subject of transactions which have resulted in an uplift to their carrying
values. This gain however has been offset by a decrease in value of associates due to loss making
performance in the year and adjusted prior year results which were not recognised by the
associates in question until mid 2023.
3. Operating segment information
The Group comprises three core operating segments from which it earns both revenues/gains and
incurs expenses, being:
• Asset Management
• Capital Markets
• Principal Investments
The identification of operating segments is performed by management and reviewed by the Chief
Executive, who have identified that such information needs to be reported separately on an ongoing
basis to inform decision making and assessment of performance. Each operating segment has its
own segment head and identifiable team/resources.
--
COINSHARES
2023 ANNUAL
REPORT
76 | 135
01
02
03
04
05
06
07
08
The accounting policies of the operating segments differ from those adopted by the Group as per the
notes, with fair value gains generated from digital assets classified as profit and loss movements rather
than movements through other comprehensive income. This treatment is consistent with that of the
Alternative Statement of Comprehensive Income.
Additionally, administrative expenses as per the Statement of Comprehensive Income are split within
the operating segments note between cost of sales and administrative expenses. Furthermore, a
portion of administrative expenses relating to FX gains and losses have been allocated to the Capital
Markets operating segment as a movement on financial instruments.
The Group does not monitor its assets and liabilities split by operating segment, but rather on a
consolidated basis.
This is the measure reported to the Group’s Chief Executive, being the Group’s chief operating
decision maker, for the assessment of segment performance.
--
77 | 135
The following is an analysis of the Group’s revenue and results by reportable segment in the year ended 31 December 2023.
Asset
Management £
Capital
Markets £
Principal
Investments £
Other
£
Total
£
Revenue 42,954,234 128,487 - -
43,082,721
(Loss)/gain on financial instruments (1,470,485,132) 191,849,844 - -
(1,278,635,288)
Gain/(loss) on digital assets 1,470,485,132 (186,498,607) 2,630,587 -
1,286,617,112
Investment gains - - 924,369 -
924,369
Finance income - 10,130,726 93,297 -
10,224,023
Other operating income - 23,402,537 44,810 -
23,447,347
Total revenue, gains & other
income
42,954,234 39,012,987 3,693,063 - 85,660,284
Finance costs - (5,935,961) (885,720) (80,338)
(6,902,019)
Cost of sales (4,767,743) (2,248,514) (235,210) -
(7,251,467)
Adjusted gross profit/(loss) 38,186,591 30,828,512 2,572,133 (80,338) 71,506,798
Other admin expenses (4,288,454) (3,470,722) - (16,585,122)
(24,344,298)
Adjusted operating profit/(loss) 33,898,037 27,357,790 2,572,133 (16,665,460) 47,162,500
Income tax expense
(573,670)
Exchange differences on translation of foreign operations
(8,192,795)
Total comprehensive income 38,396,035
Asset
Management £
Capital
Markets £
Principal
Investments £
Consumer
Platform £
Other
£
Total
£
Revenue 50,090,889 309,109 - 936,684 -
51,336,682
Gain/(loss) on financial instruments 2,349,122,865 (630,235,617) - - -
1,718,887,248
(Loss)/gain on digital assets (2,349,122,865) 582,986,520 (3,283,109) - -
(1,769,419,454)
Investment losses - - (1,795,713) - -
(1,795,713)
Finance income - 12,916,891 - - -
12,916,891
Other operating income - 16,464,651 162,327 - -
16,626,978
Total revenue, gains & other
income
50,090,889 (17,558,446) (4,916,495) 936,684 - 28,552,632
Finance costs (16,807) (5,550,377) (718,517) (44,724) -
(6,330,425)
Cost of sales (4,596,313) (2,975,042) (281,377) (814,358) -
(8,667,090)
Adjusted gross profit/(loss) 45,477,769 (26,083,865) (5,916,389) 77,602 - 13,555,117
Other admin expenses (4,029,522) (1,774,189) - (4,091,014) (19,639,283)
(29,534,008)
Adjusted operating profit/(loss) 41,448,247 (27,858,054) (5,916,389) (4,013,412) (19,639,283) (15,978,891)
Income tax expense
(368,674)
Exchange differences on translation of foreign operations
19,281,832
Total comprehensive income 2,934,267
There is no geographical split of revenues, gains or other income required in assessing the operating segments of the Group. All operations
undertaken by the Group which generate such items are ultimately based in Jersey. This analysis is already presented by means of the existing
split provided within this note.
The following is an analysis of the Group’s revenue and results by reportable segment in the year ended 31 December 2022.
COINSHARES
2023 ANNUAL
REPORT
78 | 135
01
02
03
04
05
06
07
08
4. Revenue and other income
(a) Revenue
Notes 2023 £ 2022 £
Management fees (i)
42,954,234
50,090,889
Consumer revenue (ii)
-
936,684
General Partner's Share (iii)
128,487
97,041
Other revenue
-
212,068
43,082,721
51,336,682
(i) The majority of the Group’s revenues arise from the management fees products issued by
CoinShares XBT Provider AB (publ) (‘XBTP’) and CoinShares Digital Securities Limited (‘CSDSL’), in
addition to its revenue share of the Block Index received by CoinShares Capital Markets (UK) Limited
(‘CSCMUKL’).
(ii) The Group’s subsidiary, CoinShares France (‘CSF’), operated a range of consumer based programs
offering cryptocurrency trading technology and resources, however this was ceased in January 2023.
(iii) Income is derived from the General Partner’s share for services provided to CoinShares Fund II LP
(‘CSF2LP’) (for which CoinShares GP II Limited (‘CSGP2L’), a subsidiary in the Group, acts as General
Partner), which in accordance with the Limited Partnership Agreement is one quarter of two percent
of the capital deployed per quarter.
Accounting policies
The Group earns revenue by issuing ETPs which synthetically track the performance of digital assets
under various note programmes. The Group earns fee income, which may vary depending on the note
programme, based on the market value of the ETP. The Group recognises the fee income as revenue
because it arises on a daily basis over the period that the ETP is outstanding.
The XBTP note program fee revenue is recognised on a daily basis, denominated in fiat, by means of
a reduction in the liability owing to the ETP holder. Due to the structure of the XBTP ETPs, and the way
in which the Group elects to hedge the liability arising from the issuance of these ETPs, the revenue
remains held as part of the overall hedging asset balance until such a time that notes are redeemed,
at which point the cash is realised. There is no digital asset exposure risk attached to the revenue that
remains held within the hedging assets between recognition and redemption.
The CSDSL management fee note program fee revenue is recognised on a daily basis, denominated in
digital assets, by means of a reduction in the coin entitlement owing to the ETP holder. For the staking
products with no fee, revenue arising from staking is also denominated in digital assets, with a portion
of such proceeds owing to noteholders through increasing the coin entitlement. These revenues are
converted on a regular basis into fiat in order to mitigate the risk of digital asset price fluctuations
impacting upon revenues arising from CSDSL. There is no digital asset exposure risk attached to the
revenue that remains held within the hedging assets between recognition and redemption.
The Group also earns revenue from the provision of investment management services. Revenue is
recognised when the performance obligation has been satisfied by transferring the promised services
to the customer on a straight line basis over the period during which the service is provided.
COINSHARES
2023 ANNUAL
REPORT
79 | 135
01
02
03
04
05
06
07
08
(b) Other operating income
2023 £ 2022 £
Fee rebates
1,475,104
5,459,170
Staking rewards and DeFi
20,425,784
8,041,736
Airdrop income
77,024
3,131,456
Other operating income
1,469,435
(5,384)
23,447,347
16,626,978
Accounting policies
Other operating income relates to income earned that is not revenue. Other operating income is
recognised when it is probable that it will be received by the Group.
Digital assets received as a result of staking activities and airdrops are initially recognised within other
operating income. Following initial recognition, such digital assets are valued in accordance with
the Group’s policy on digital assets, with unrealised gains being recognised in other comprehensive
income, and losses recognised through profit and loss, unless such a loss is reversing a gain previously
recognised through other comprehensive income.
5. Material profit or loss items
The Group has identified a number of items which it believes to be material due to the significance of
their nature and/or amount. These are listed separately here to provide a better understanding of the
performance of the Group.
Notes 2023 £ 2022 £
Management fees 4(a)
42,954,234
50,090,889
Staking rewards and DeFi 4(b)
20,425,784
8,041,736
Fair value gain/(loss) on investments through
profit and loss
9(d)
11,365,752
(2,800,424)
Fair value loss on investments in joint ventures/
associates
9(e)
(10,590,566)
(2,149,611)
Goodwill impairment (impairment charges) 10(c)(i)
-
(5,473,525)
Provision for FTX balances (impairment charges) 9(g)
60,160
(25,492,017)
Terra/Luna de-pegging (loss on digital assets)
-
(18,360,079)
6. Other income and expense items
(a) Cost of sales
2023 £ 2022 £
Trading expenses
1,494,707
3,350,468
Issuer fees
1,148,568
1,004,073
Custody fees
1,397,770
1,365,500
Direct salary costs
1,646,449
1,266,456
Amortisation of Block Index
1,563,972
1,680,593
7,251,466
8,667,090
COINSHARES
2023 ANNUAL
REPORT
80 | 135
01
02
03
04
05
06
07
08
Accounting policies
Cost of sales is considered to be the direct costs incurred by the Group in the process of earning
revenue in addition to the ongoing straight-line amortisation charge against the Block Index intangible
asset included within note 10(d). Any other costs incurred are recognised through administration
expenses.
(b) Breakdown of administration expenses by nature
2023 £ 2022 £
Salary costs
8,289,331
10,075,504
Bonus accrual
2,391,973
755,538
Professional fees
2,201,172
3,484,387
Marketing
2,582,142
2,437,449
Legal fees
765,124
560,228
IT expenses
1,928,391
1,198,150
Depreciation of right of use assets
1,221,439
872,526
Depreciation of owned assets
201,619
240,683
Entertainment expense
107,559
181,256
Travel expense
718,549
597,753
Fees payable to the Company’s auditor for the
Group’s current year financial statements
397,500
336,150
Fees payable to the Company’s auditor for the
Group’s prior year financial statements
3,500
23,500
Other expenses
594,206
3,069,828
21,392,505
23,832,952
(c) Finance income and costs
2023 £ 2022 £
Finance income from financial instruments
measured at amortised cost:
Interest from bank and broker deposits
8,289,352
1,615,666
Interest from other financial assets measured
at amortised cost
1,934,671
11,301,225
10,224,023
12,916,891
2023 £ 2022 £
Finance costs on financial instruments
measured at amortised cost:
Interest on other borrowings
1,130,946
3,306,828
Interest on amounts owed to brokers
5,695,949
3,009,380
Interest on lease liabilities
75,124
14,217
6,902,019
6,330,425
COINSHARES
2023 ANNUAL
REPORT
81 | 135
01
02
03
04
05
06
07
08
7. Income tax expense
Corporation tax
2023 £ 2022 £
Current tax on results for the year
573,670
368,674
Taxation on ordinary activities
573,670
368,674
The Group is subject to various corporation taxes as noted below. The Company is subject to tax at the
rate of 0%.
2023 £ 2022 £
(Loss)/profit on ordinary activities before income tax expense
(452,552,807)
520,584,738
Tax calculated at Jersey tax rate of 0% (2022: 0%)
-
-
Effects of:
2023 £ 2022 £
Tax calculated at Jersey tax rate for regulated financial service
companies of 10% (incurred by CoinShares (Jersey) Limited (‘CSJL’))
48,596
(23,796)
Tax calculated at Swedish tax rate of 22% (incurred by XBTP)
17,670
3,417
Tax calculated at UK tax rate of 23.52% (2022: 19%) (incurred by
CoinShares (UK) Limited (‘CSUKL’), Elwood Asset Management
Services Limited (‘EASML’) and CSCMUKL)
504,904
484,609
Tax calculated at French tax rate of 26.5% (incurred by CSF)
1,896
(95,556)
Tax calculated at US tax rates (incurred by CoinShares Co. and
CoinShares GP I LP)
604
-
Total tax charge for the year 573,670
368,674
Taxation for other jurisdictions is calculated at the various rates and laws substantively enacted on as
at the reporting date.
Apart from the UK, there have been no changes in tax rates from the prior year. In the UK, the applicable
tax rate was amended from 19% to 25% on 1 April 2023. Given that this is over 2 financial years for the
Group, a blended tax rate has been calculated using the number of days falling in each tax year.
The current tax liability at the year end is £156,970 (2022: £235,814).
Accounting policies
The taxation charge is based on the profit for the year as adjusted for tax purposes. The Company pays
tax at 0%, the standard Jersey tax rate. Entities within the Group pay tax at various rates throughout the
jurisdictions, as described above.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit
as reported in profit and loss because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
COINSHARES
2023 ANNUAL
REPORT
82 | 135
01
02
03
04
05
06
07
08
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business combination) of other assets and liabilities in
a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax
liability is not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is
settled, or the asset is realised based on tax laws and rates that have been enacted or substantively
enacted at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Current and deferred tax are recognised in profit and loss, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Where current tax or deferred tax arises from the initial accounting for a business combination, the tax
effect is included in the accounting for the business combination.
--
COINSHARES
2023 ANNUAL
REPORT
83 | 135
01
02
03
04
05
06
07
08
8. Digital assets
2023 £ 2022 £
Non-current digital assets
1,331,614
111,978
Current digital assets
2,375,850,359
868,922,517
2,377,181,973
869,034,495
(i) Digital assets
2023
Units
2022
Units
2023
£
2022
£
By Currency
Bitcoin
41,065
28,308
1,372,851,942
387,768,139
Ethereum
451,575
451,734
816,970,454
447,248,857
Other digital assets
187,359,577
34,017,499
2,377,181,973
869,034,495
2023 £ 2022 £
By Venue
Custodian
1,678,952,130
772,807,015
Custody Platform
590,266,296
74,704,515
Exchange
103,937,400
20,368,749
Local cold storage
4,026,147
1,154,216
2,377,181,973
869,034,495
NUMERICAL INFORMATION - STATEMENT OF FINANCIAL POSITION
Measurement of digital assets
Digital assets that are freely tradeable are measured at fair value and have been classified as Level 1 in
accordance with the IFRS fair value hierarchy. Price movements are recognised at fair value through
profit and loss or through other comprehensive income, as outlined below within the digital asset
accounting policies section of this note. A reconciliation of movements in digital assets is also shown
below.
Purpose of holdings
The majority of the digital assets are held in respect of hedging the certificate liability arising from the
issuance of ETPs by XBTP and as collateral for the issuance of ETPs issued by CSDSL. However, a
portion of digital assets held by the Group do not form part of its hedging/collateral obligations. Of the
£2,377,181,973 (2022: £869,034,495) of assets held, £31,122,973 (2022: £2,251,032) do not form part
of the hedge.
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02
03
04
05
06
07
08
2023 £ 2022 £
Opening position 869,034,495 2,764,318,368
Net purchases/(sales) of digital assets 272,306,887 (358,800,843)
Fair value gains/(losses) on digital assets
through profit and loss
787,050,987 (1,226,595,255)
Fair value gains/(losses) on digital assets
through OCI
499,566,125 (539,108,506)
Translation of holdings in USD denominated
subsidiaries
(50,776,521) 229,220,731
Closing position 2,377,181,973 869,034,495
The Group has classed digital assets under the fair value hierarchy as follows.
Location of assets
The majority of the Group’s digital assets are held with regulated digital asset custodians or staked
through certain providers. In the case of the latter, the private keys for these holdings are retained
by the Group which mitigates counterparty risk. In order to mitigate the potential for increased
counterparty risk arising from assets held on exchange, the Group relies on a range of monitoring
procedures which are detailed in note 13(b).
As at 31 December 2023, the balance of £103,937,400 (2022: £20,368,749) was held at 14 locations.
The level of overall current assets held on exchange (represented by both digital assets and also cash
balances) as at 31 December 2023 was 4% (2022: 2%).
2023 £ 2022 £
Level 1 digital assets
2,375,850,359
868,777,452
Level 2 digital assets
1,331,614
257,043
2,377,181,973
869,034,495
There have been no transfers of digital assets between fair value hierarchy levels.
COINSHARES
2023 ANNUAL
REPORT
85 | 135
01
02
03
04
05
06
07
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Accounting policies
Digital assets are accounted for as intangible assets under the revaluation model. After initial recognition,
an intangible asset shall be carried at a revalued amount, being its fair value at the date of the revaluation
less any subsequent accumulated amortisation and any subsequent accumulated impairment losses.
Under IFRS, most intangible assets other than goodwill are presumed to have a finite life. However, in
the case of the majority of digital assets held by the Group, the residual value is equal to the carrying
value, because (i) there is an active market, (ii) it is probable that the market will exist and (iii) the
residual value can be determined by reference to the market. As such digital assets are not amortised.
The overarching accounting policy that is adopted in respect of valuing the Group’s digital assets is
as follows:
• Digital assets which are freely tradeable and for which there is an active market are valued using
unadjusted quoted prices, or an average of unadjusted quoted prices, taken from active markets.
As such, these digital assets are classified as Level 1 in the fair value hierarchy;
• Digital assets that are subject to lock-up and not freely tradeable are valued using quoted prices
discounted for a lack of liquidity. As such these digital assets have been classified as Level 2 in
the fair value hierarchy. At the point when such digital assets become freely tradeable, they are
reclassified as Level 1 in the fair value hierarchy and accounted for in line with other digital assets;
• In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an asset’s level within the fair value hierarchy is based on the lowest
level of input that is significant to the fair value measurement. The directors’ assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgement
and it considers factors specific to the asset;
• Increases in the fair value of digital assets are recognised in other comprehensive income, unless
the increase reverses a revaluation loss previously recognised in profit and loss, in which case
such an amount is recognised in profit and loss;
• A decrease in the carrying value of a digital asset as a result of a revaluation loss is recognised in
other comprehensive income to the extent that it reverses gains previously recognised in other
comprehensive income. If a revaluation loss exceeds the accumulated gains recognised in equity
in respect of digital assets, the excess is recognised in profit and loss; and
• Digital assets are derecognised when the Group has transferred substantially all the risks and
rewards of ownership on disposal. On disposal of digital assets, any cumulative gain previously
recognised in other comprehensive income and accumulated in the revaluation reserve, is
transferred to retained earnings.
The Group holds digital assets for different purposes, namely (i) to collateralise the exchange traded
products issued by its wholly owned subsidiary CSDSL, (ii) to hedge the liability arising from the issuance
of exchange traded products by its wholly owned subsidiary XBTP, and (iii) as investments.
Within CSDSL the digital assets are held in order to collateralise a number of exchange traded
products. The exchange traded products are re-measured using reference indices as defined in the
relevant prospectus for such products. The digital assets are valued using the same methodology,
relying on an unadjusted index price. This prevents an accounting mismatch between the valuation of
the digital assets and the certificates held.
Within CoinShares Capital Markets (Jersey) Limited (‘CSCMJL’), Bitcoin and Ethereum are valued by
the Company based on the average price of the three most liquid exchanges as defined in the XBTP
prospectus at the date of valuation. The valuation takes place daily at 08:00-12:00 (UTC) for Bitcoin,
where the value is calculated as the unweighted average price between the Bitcoin exchanges of
the weighted average price for the period of each underlying exchange (separately). For Ethereum
the valuation takes place daily at 16:00 (UTC). Although these valuations are ultimately derived from
a number of sources, the sources themselves are unadjusted and would each represent a Level 1
--
COINSHARES
2023 ANNUAL
REPORT
86 | 135
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02
03
04
05
06
07
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classification within the fair value hierarchy. As such, these holdings have been classified as Level 1.
Should the average price of the three exchanges utilised show a material difference to any of the prices
from an individual exchange, the classification of these assets as Level 1 would be reassessed.
CSCMJL also holds perpetual and futures contracts both referencing and settled in digital assets. The
gains or losses arising from these contracts are classified as digital assets due to both the nature of
settlement and liquidity profile of such gains and losses operating in the same manner of digital assets
held on exchange. Due this classification, such gain/loss is remeasured using the average price on
the three most liquid exchanges. These contracts are held for the same purpose as the majority of
the companies digital assets, being the hedging the Company’s liability to certificate holders of the
products issued by XBTP. As such, the value of the contracts is adjusted to reflect their valuation on
the same basis and at the same time as the certificate liability.
All other digital asset holdings within CSCMJL and held by other Group entities are valued by the
Company based on an unadjusted price derived from a global cryptocurrency market data provider.
On consolidation, no adjustments are made to these valuation approaches to create an alignment at
the Group level. The directors consider that the assets held by each subsidiary are sufficiently different
(and are therefore separate classes) insofar as they are being held for different purposes, and in the
case of those held to hedge/collateralise exchange traded products, have a corresponding liability.
This approach ensures the prevention of an accounting mismatch between the valuation of the digital
assets and certificates held.
This approach also reflects the prices that represent the most advantageous market available to sell
each class of asset. The CSDSL digital assets are restricted to only being tradeable for a defined financial
instrument (the ETP liability), the fair values of which are defined by the CSDSL prospectus. The XBTP
assets are tradeable on any exchange, therefore the average price of three exchanges (as defined in the
prospectus) represents management’s best estimate of the most advantageous market price.
Critical judgement - accounting treatment of digital assets
In the absence of any specific accounting standard dealing with digital assets, the directors have
exercised critical judgement in classifying the Group’s digital assets, comprising principally of
cryptocurrency, as intangible assets. IFRS contains no explicit definition of the terms ‘cash’ or
‘currency’ but it is currently accepted practice under IFRS that cryptocurrency should not be
considered as such, this is on the basis that it lacks some of the common properties of cash and
currency. Digital assets do not meet the definition of a financial instrument because there is no right
to receive cash (or another financial asset), and classification as inventory is not appropriate because
the Group’s digital assets are not held for sale in the ordinary course of business. The Group holds
digital assets for the purpose of hedging and the directors have determined that the assets meet the
definition of an intangible asset under IAS 38 ‘Intangible Assets’.
--
COINSHARES
2023 ANNUAL
REPORT
87 | 135
01
02
03
04
05
06
07
08
9. Financial assets and liabilities
The table below sets out the financial assets and liabilities held by the Group.
Notes 2023 £ 2022 £
Current financial assets
Cash and cash equivalents
9(c)
25,507,944
134,768,902
Trade and other receivables
9(a)
2,241,203
1,458,179
Other current assets
9(b)
266,093,775
177,565,926
293,842,922
313,793,007
Notes 2023 £ 2022 £
Non-current financial assets
Trade and other receivables
9(a)
328,614
806,052
Other non-current assets
9(b)
2,211,742
1,968,199
2,540,356
2,774,251
Notes 2023 £ 2022 £
Current financial liabilities
Amounts due to brokers
9(c)
(669,402)
-
Trade and other payables
9(g)
(5,612,218)
(3,969,783)
Other current liabilities
9(i)
(108,940,878)
(27,116,746)
(115,222,498)
(31,086,529)
Notes 2023 £ 2022 £
Non-current financial liabilities
Non-current loans
9(i)
(23,145,127)
(21,433,967)
(23,145,127)
(21,433,967)
Movements in financial assets and financial liabilities
The financial assets and liabilities held by the Group are subject to price movements which result in
operating gains or losses. These movements are predominantly in relation to the digital asset ETPs
issued by third parties and held by the Group as part of the XBTP hedging assets (note 9(b)).
The table below sets out the other operating gains/(losses) through profit and loss arising from these
movements.
2023 £ 2022 £
Gain/(loss) on digital asset ETPs
135,959,647
(660,389,251)
Gain on digital asset payables/receivables
35,568,047
22,022,880
Gain on derivatives
17,180,194
8,866,308
Gain/(loss) on other operating activities
130,003
(254,630)
188,837,891
(629,754,694)
COINSHARES
2023 ANNUAL
REPORT
88 | 135
01
02
03
04
05
06
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Accounting policies
Certain of the Group’s ETPs, and other derivative contracts, are settled in digital assets and therefore
do not meet the definition of a financial instrument set out in IFRS 9. In all other respects they operate in
the same way as an equivalent contract settled in cash. The Group has determined that the accounting
policies for these contracts are the same as they would be for an equivalent contract settled in cash
and meeting the definition of a financial instrument. These contracts are referred to as ‘financial
instruments’ in the financial statements and are analysed as such in the financial instruments note.
Financial assets
The accounting policy for non-current asset investments where the Group does not have control or
significant influence, which are financial assets accounted for under IFRS 9.
Initial recognition and measurement
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of
trade receivables, the Group initially measures a financial asset at its fair value plus, in the case of a
financial asset not measured at fair value through profit or loss, transaction costs. Trade receivables are
initially measured at the transaction price.
Subsequent measurement
Subsequently the Group’s financial assets are classified into several categories:
• Financial assets measured at amortised cost;
• Financial assets measured at fair value through profit or loss; and
• Financial assets measured at fair value through other comprehensive income.
Financial assets at amortised cost and effective interest model
The effective interest method is a method of calculating the amortised cost of a debt instrument and
allocating interest income over the relevant period.
For financial assets, the effective interest rate is the rate that exactly discounts estimated future cash
receipts (including all fees and points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) excluding expected credit losses, through
the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying
amount of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortisation using the effective
interest method of any difference between that initial amount and the maturity amount, adjusted for
any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial
asset before adjusting for any loss allowance.
Financial assets at amortised cost held by the Group include right-of-use lease assets.
Financial assets at fair value through profit or loss
Financial assets classified as current assets are measured at fair value through profit or loss. The fair
value basis is measured using the fair value hierarchy.
Investments valued through Other Comprehensive Income
Certain balances which are classified as investments held by the Group represent carried interest
receivables on funds. Due to the lack of clarity around the timing of ultimate receipt of these amounts,
these investments are revalued through other comprehensive income until such a time when the
receivable is realised.
--
COINSHARES
2023 ANNUAL
REPORT
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06
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08
Impairment of financial assets measured at amortised cost
An impairment loss is recognised for the expected credit losses on financial assets when there is an
increased probability that the counterparty will be unable to settle an instrument’s contractual cash
flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both.
The probability of default and expected amounts recoverable are assessed using reasonable and
supportable past and forward-looking information that is available without undue cost or effort. The
expected credit loss is a probability-weighted amount determined from a range of outcomes and takes
into account the time value of money.
The measurement of impairment losses depends on whether the financial asset is ‘performing’,
‘underperforming’ or ‘non-performing’ based on the Group’s assessment of increases in the credit
risk of the financial asset since its initial recognition and any events that have occurred before the year-
end which have a detrimental impact on cash flows. The financial asset moves from ‘performing’ to
‘underperforming’ when the increase in credit risk since initial recognition becomes significant.
In assessing whether credit risk has increased significantly, the Group compares the risk of default
at the year-end with the risk of a default when the financial asset was originally recognised using
reasonable and supportable past and forward-looking information that is available without undue
cost. The risk of a default occurring takes into consideration default events that are possible within 12
months of the year-end (‘the 12-month expected credit losses’) for ‘performing’ financial assets, and
all possible default events over the expected life of those debtors (‘the lifetime expected credit losses’)
for ‘underperforming’ financial assets.
Impairment losses and any subsequent reversals of impairment losses are adjusted against the
carrying amount of the financial asset and are recognised in profit and loss.
For trade receivables, expected credit losses are measured by applying a simplified method using a
provision matrix. The expected loss rate comprises the risk of a default occurring and the expected
cash flows on a default based on the ageing of the debtor. The risk of a default occurring always takes
into consideration all possible default events over the expected life of those debtors. Different provision
rates and periods are used based on groupings of historic credit loss experience by product type,
customer type and location.
Derecognition of financial assets
Financial assets, or a part thereof, are derecognised only when the contractual rights to the cash flows
from the asset expire or are settled, or when the Group transfers the financial asset and substantially all
the risks and rewards of ownership to another entity.
When there is no reasonable expectation of recovering a financial asset it is derecognised. The gain or
loss on derecognition is recognised in profit and loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a residual interest in the assets of the company
after deduction of all its liabilities.
Financial liabilities are initially recognised at fair value, which is normally equivalent to transaction price,
less transaction costs.
--
COINSHARES
2023 ANNUAL
REPORT
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Subsequent measurement
Subsequently the Group’s financial liabilities are classified into two categories:
• Financial liabilities measured at amortised cost; and
• Financial liabilities measured at fair value through profit or loss (‘FVTPL’).
Financial liabilities at amortised cost
Financial liabilities that are not (i) held for trading, or (ii) designated as at FVTPL, are measured
subsequently at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and
of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost
of a financial liability.
Financial liabilities at amortised cost held by the Group include loans payable with contractual cashflows
and lease liabilities.
Financial liabilities at fair value through profit or loss
Financial liabilities not held at amortised cost and whose business objectives are not achieved through
trading or contractual cashflows are measured at fair value through profit or loss.
Financial liabilities at fair value through profit or loss held by the Group include amounts due to the
holders of Group issued ETPs.
Liabilities arising in connection with ETPs issued by the Group referencing the performance of digital
assets are measured at fair value through profit or loss. Their fair value is a function of the unadjusted
quoted price of the digital asset underlying the ETP, less any accumulated management fees, measured
as described in note 2.19.
The fair value basis is consistent with the measurement of the underlying digital assets which are
considered Level 1 under the fair value hierarchy.
Derecognition of financial liabilities
Financial liabilities (or part thereof) are derecognised when, and only when, the Group’s obligations are
discharged, cancelled, or they expire. Any difference between the carrying amount of a financial liability
(or part thereof) that is derecognised and the consideration paid is recognised in profit or loss.
--
COINSHARES
2023 ANNUAL
REPORT
91 | 135
01
02
03
04
05
06
07
08
Notes 2023 £ 2022 £
Current
Accounts receivable
1,323,766
390,349
Amounts owed by related parties
(i)
33,875
32,450
Deposits paid
118,944
124,667
Prepayments
591,433
473,964
VAT receivable
173,185
436,749
Total current 2,241,203
1,458,179
Non-current
Deposits paid
305,335
52,969
Deferred tax
23,279
753,083
Total non-current 328,614
806,052
Total trade receivables 2,569,817
2,264,231
(a) Trade receivables
(i) Amounts owed by related parties are unsecured, interest free, have no fixed date of repayment and
are repayable on demand. See note 19 for related party transaction disclosures.
Expected credit losses
Credit risk is considered as part of the risk disclosures in note 13(b). Management has undertaken a
review of the credit loss and calculated that the risk of credit loss to be minimal. When calculating the
value of this, the amount was considered insignificant to the Group.
Management regularly review this position to ensure that this is reasonable for the Group.
(b) Other assets
Notes 2023 £ 2022 £
Current
Digital asset ETPs and funds
(i)
211,384,245
96,788,146
Other assets
(ii), (iv)
54,709,530
80,777,780
Total current 266,093,775
177,565,926
Non-current
Loans receivable
(iii)
1,469,196
1,968,199
Other assets
(iv)
742,546
-
Total non-current 2,211,742
1,968,199
Total other assets 268,305,517
179,534,125
(i) Digital asset ETPs and funds held as at year end totalled £211,384,245 (2022: £96,788,146). These
holdings are used to provide exposure to digital assets and are held as a part of the Group’s collateral
management obligations.
COINSHARES
2023 ANNUAL
REPORT
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01
02
03
04
05
06
07
08
(ii) The majority of current other assets represent digital asset lending balances to small number of
counterparties totalling £49,146,747.
Credit risk in relation to these lending balances is considered as part of the risk disclosures in note
13(b). No provision for expected credit losses has been applied to these lending amounts.
(iii) This balance predominantly comprises a convertible loan note issued to Finrate AG (‘Finrate’)
on 14 October 2021 for a principal amount of CHF750,000 in October 2021 for a term of 24 months
(£595,181).
(iv) The Group held a 16% shareholding in SBG 1320 LLC (‘SBG’). During the year SBG underwent
some restructuring which has resulted in SBG receiving cash payments which will ultimately be paid
onto its shareholders. These payments have been recognised in current and non-current assets
according to the time in which it is expected to be received. £589,182 has been recognised as a current
asset, and £742,546 as a non-current asset.
(c) Cash and cash equivalents
Notes 2023 £ 2022 £
Cash at bank
6,660,753
26,567,599
Amounts due from brokers
(i)
16,270,974
98,128,995
Amounts due from exchanges
2,576,217
10,072,308
25,507,944
134,768,902
Amounts due to brokers
(ii)
(669,402)
-
Total cash and cash equivalents 24,838,542
134,768,902
2023 £
Opening position
96,788,146
Net additions and transfers 87,584,384
Net disposals and transfers (99,519,032)
Net movement (11,934,648)
Realised gain 41,353,275
Unrealised gain 94,606,372
Net gain 135,959,647
Exchange differences (9,428,900)
Closing position 211,384,245
The table below shows a reconciliation between the opening and closing position of the Group’s digital
asset ETPs and funds holdings.
COINSHARES
2023 ANNUAL
REPORT
93 | 135
01
02
03
04
05
06
07
08
2023 £ 2022 £
(i) Due from brokers
Interactive Brokers
11,952,502
22,839,202
Marex Capital
4,305,194
71,546,706
Marex Prime
-
3,729,405
Mangold
13,278
13,682
16,270,974
98,128,995
(ii) Due to brokers
Marex Prime Services
(669,402)
-
(669,402)
-
Amounts due from/to brokers and amounts due from exchanges represent cash held by/payable to
brokers and exchanges and are classified as cash and cash equivalents. Amounts payable from/to
brokers accrue interest. The Company has the right and ability to settle its obligations with brokers on a
net basis.
Accounting policies
Cash at bank
Cash at bank consists of balances with banks and are classified as basic financial assets with a maturity
of three months or less from inception.
Cash deposits with financial institutions are repayable without penalty on notice of not more than 24
hours.
Amounts due from/to brokers
Amounts due from/to brokers represent cash receivable from/payable to brokerage firms, arising due
to the ongoing trading activities of the Group, and are classified as cash equivalents.
Amounts due from/to exchanges
Amounts due from/to exchanges represents cash receivables from/payable to exchanges in relation to
digital assets transactions and are classified as basic financial assets/liabilities.
Other cash equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of changes in value.
COINSHARES
2023 ANNUAL
REPORT
94 | 135
01
02
03
04
05
06
07
08
(d) Investments in third parties
31 December
2022
£
Additions/
(Disposals)
£
Investment
Gain/(Loss)
£
Transfers
between
levels £
31 December
2023
£
Level 1 Investments 236 - 375 -
611
Level 2 Investments 5,279,885 - 149,182 -
5,429,067
Level 3 Investments 9,327,835 (1,011,478) 11,364,844 -
19,681,201
Total investments
held at fair value
14,607,956 (1,011,478) 11,514,401 -
25,110,879
Associates 30,403,894 - (10,590,566) -
19,813,328
Total investments
valued using the
equity method
30,403,894 - (10,590,566) -
19,813,328
Total investments 45,011,850 (1,011,478) 923,835 - 44,924,207
Investments in
Joint Ventures
& Associates £
Investments
in Listed
Equities £
Other
Investments
Through
P&L £
Other
Investments
Through
OCI £
Total
£
At 31 December 2022 30,403,894 236 9,327,835 5,279,885
45,011,850
Additions - - 480,638 -
481,546
Disposals - - (1,493,024) -
(1,493,024)
Fair value gain through
profit and loss
- 375 11,250,135 -
11,249,602
Fair value gain through
other comprehensive
income
- - - 149,182
149,182
Share of associate and
joint venture losses
(7,678,357) - - -
(7,678,357)
Exchange differences
through profit and loss
(2,912,209) - 115,617 -
(2,796,592)
At 31 December 2023 19,813,328 611 19,681,201 5,429,067 44,924,207
For the balance of £19,681,201 which represents investments classified as Level 3 within the fair value
hierarchy, the following table summarises the quantitative information about the significant inputs used.
Description Fair value (i)
£
Unobservable
inputs
Input
amount
Input
range
Unlisted equities not
held at cost
19,681,201
Discount factor on price
of recent investment
0% -20% to 0%
COINSHARES
2023 ANNUAL
REPORT
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02
03
04
05
06
07
08
(i) Decreasing all inputs to the lowest points of the given ranges would decrease fair value as at 31
December 2023 by £3,936,240.
Increasing all inputs to the highest point of the given ranges would result in no change to the fair value
as at 31 December 2023.
Accounting policies
In the financial statements of the Group, investments in listed equities and other investments are
held at fair value through profit or loss except where the directors have made an irrevocable claim to
designate fair value movements through other comprehensive income.
Simple Agreements for Future Tokens/Equity
Such agreements outline the delivery of digital assets (referred to as Tokens (‘SAFTs’), equity
(‘SAFEs’) or a combination thereof (‘SAFTEs’)) to the Group either on a specified date or following
the occurrence of a defined event. These agreements are initially recognised at fair value as of the
date they are entered. SAFTs are classified as digital asset receivables and are subsequently measured
at fair value as described in note 8. SAFEs are classified as financial assets through profit and loss,
and further detail on the Group’s fair value accounting policy can be found in note 22. In cases where
the Group holds SAFEs with hybrid elements, these are evaluated separately based on their risks and
characteristics.
These agreements are monitored on an ongoing basis. In the event that the ultimate delivery of the
tokens/equity is called into question, or the likely value of the holding is deemed to be lower than initial
cost, the receivable will be impaired with such charge being taken through profit and loss.
Key accounting estimate and assumption
Valuation of investments
The fair value of financial instruments, including investments, that are not traded in an active market is
determined using valuation techniques. The Group uses its judgement to select a variety of methods
and make assumptions that are mainly based on market conditions existing at the end of each reporting
period.
(e) Investments in associates
The Company’s investments in associates which form part of the Group as at 31 December 2023 are
as follows:
Name Investee
Relationship
Ownership Jurisdiction Date of
Initial
Investment
Gold Token SA Associate 22.54% Switzerland 08/08/2018
FlowB Holding Switzerland SA Associate 26.75% Switzerland 02/10/2021
The entities listed above have share capital consisting solely of ordinary shares, which are held directly
by the Group. The jurisdiction is also their principal place of business, and the proportion of ownership
interest is the same as the proportion of voting rights held.
COINSHARES
2023 ANNUAL
REPORT
96 | 135
01
02
03
04
05
06
07
08
2023 £ 2022 £
Revenue
3,917,708
835,604
Loss after tax
(26,489,600)
(10,455,626)
Total comprehensive loss (26,489,600)
(10,455,626)
Our share of total comprehensive loss (7,461,390)
(1,786,409)
FlowBank’s unaudited statement of financial position:
2023 £ 2022 £
Current assets
577,858,629
139,648,308
Non-current assets
19,315,839
7,309,289
Total assets 597,174,468
146,957,597
Current liabilities
(582,782,137)
(122,727,107)
Total liabilities (582,782,137)
(122,727,107)
Net assets 14,392,331
24,230,490
Reconciliation of FlowBanks carrying value:
2023 £ 2022 £
Opening net assets
24,230,490
24,783,303
Loss for the period
(26,489,600)
(10,455,626)
Capital contributions
12,604,438
8,584,414
Exchange differences
4,047,003
1,318,399
Closing net assets
14,392,331
24,230,490
Our share of FlowBank's net assets (26.75%)
4,074,469
6,859,652
Deemed goodwill
15,680,828
23,269,931
Carrying amount of interest in associate 19,755,297
30,129,583
The Group held a 22.54% position in Gold Token SA (‘GTSA’) throughout the year and continues to
value it under the equity method. As a result, the Group recognised a loss on associates of £216,967
(2022: £143,249) in relation to GTSA’s performance during the year and the carrying value as at 31
December 2023 is £58,031 (2022: £274,998).
The Group held a 26.75% position in FlowB Holding Switzerland SA (FlowBank) throughout the year.
Following the recognition of FlowBank’s performance for the year under the equity method, the Group
recognised a loss on associates of £10,373,599 (2022: £1,775,453) and the carrying value as at 31
December 2023 stands at £19,755,297 (2022: £30,128,895).
The following tables provide unaudited summarised financial information for FlowBank, which is
considered material to the group. The information disclosed reflects the amounts presented in the
financials statements of the associate and not the Group’s share of those amounts. They have been
amended to reflect adjustments made by the Group when applying the equity method, including fair
value adjustments and modifications for differences in accounting policy.
FlowBank’s unaudited statement of comprehensive income for the year ended 31 December 2023:
COINSHARES
2023 ANNUAL
REPORT
97 | 135
01
02
03
04
05
06
07
08
Accounting policies
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
An associate is an entity over which the Group has significant influence and that is neither a subsidiary
nor an interest in a joint venture. Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control over those policies.
In the Group consolidated financial statements the results and assets and liabilities of associates or
joint ventures are incorporated using the equity method of accounting, unless the investee is held
indirectly through a venture capitalist organisation in which case the investment is measured at fair
value through profit or loss.
Under the equity method, an investment in an associate or a joint venture is recognised initially in the
consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s
share of the profit or loss and other comprehensive income of the associate or joint venture. When the
Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate
or joint venture, the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the associate or joint venture.
The requirements of IAS 36 are applied to determine whether it is necessary to recognise any impairment
loss with respect to the Group’s investment in an associate or a joint venture accounted for under the
equity method. When necessary, the entire carrying amount of the investment (including goodwill) is
tested for impairment in accordance with IAS 36 as a single asset by comparing its recoverable amount
(higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment
loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount
of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the
extent that the recoverable amount of the investment subsequently increases.
--
COINSHARES
2023 ANNUAL
REPORT
98 | 135
01
02
03
04
05
06
07
08
(f) Certificate liability
31 December
2023
Number
31 December
2022
Number
31 December
2023
£
31 December
2022
£
Certificate type
Bitcoin Tracker One
3,468,999
3,623,578
537,280,975
212,792,525
Bitcoin Tracker Euro
432,477
459,701
666,988,025
266,534,307
Ether Tracker One
15,309,343
16,649,235
255,254,209
146,946,227
Ether Tracker Euro
2,487,963
2,774,973
413,056,557
242,649,103
CoinShares Physical Bitcoin
9,339,130
4,948,800
301,998,264
66,880,637
CoinShares Physical Ethereum
1,718,953
1,212,286
91,269,305
35,727,952
CoinShares Physical Litecoin
401,500
212,500
4,470,073
2,416,053
CoinShares Physical XRP
874,300
434,800
16,404,468
4,840,826
CoinShares Physical Staked Polkadot
557,500
257,500
4,084,656
980,519
CoinShares Physical Staked Tezos
564,000
453,000
2,415,298
1,402,567
CoinShares Physical Staked Solana
3,652,100
758,100
31,071,177
650,566
CoinShares Physical Chainlink
3,111,000
715,000
3,652,266
329,077
CoinShares Physical Uniswap
2,310,000
910,000
1,336,096
384,530
CoinShares Physical Staked Cardano
22,705,000
8,265,000
11,272,945
1,764,189
CoinShares Physical Staked Cosmos
374,500
193,000
1,724,979
774,317
CoinShares Physical Staked Polygon
568,500
195,000
4,758,310
1,277,325
CoinShares Physical Staked Algorand
2,161,000
245,000
3,939,541
356,770
CoinShares Physical Top 10 Crypto Market
25,000
-
346,970
-
CoinShares Physical Smart Contract Platform
10,000
-
151,409
-
2,351,475,523
986,707,490
The certificates are held at fair value through profit or loss. The fair value of the certificates are
calculated with reference to market prices as defined in the relevant prospectus.
Reconciliation of certificates
£
At 31 December 2022 986,707,490
Movement on certificate liability 1,470,485,132
Management fees (41,557,412)
Movement from net issuance/redemption (64,159,687)
At 31 December 2023 2,351,475,523
Accounting treatment of ETPs
Certain of the Group’s ETPs, and other derivative contracts, are settled in digital assets and therefore
do not meet the definition of a financial instrument set out in IFRS 9. In all other respects they operate in
the same way as an equivalent contract settled in cash. The Group has determined that the accounting
policies for these contracts are the same as they would be for an equivalent contract settled in cash
and meeting the definition of a financial instrument.
COINSHARES
2023 ANNUAL
REPORT
99 | 135
01
02
03
04
05
06
07
08
(g) Trade and other payables
2023 £ 2022 £
Current
Accounts payable
1,004,360
1,081,702
Accrued liabilities
4,607,858
2,888,081
Total trade payables 5,612,218
3,969,783
(h) Impairment reversals/(charges)
On 11 November 2022, the world’s third largest cryptocurrency exchange, FTX Trading Ltd. (‘FTX’),
filed for Chapter 11 bankruptcy protection in the United States. The Group held digital assets and
US Dollars with FTX amounting to a total exposure of £25,492,017 million. As a result of significant
uncertainty surrounding the recoverability of these assets, an impairment loss was recognised in
respect of the Group’s exposure. Further details of the Group’s claim over these assets are included
in note 17.
In 2023 £60,160 of this impairment loss was reversed in relation to the replacement of certain tokens
that had been held at FTX under the terms of a token delivery agreement.
(i) Other current liabilities and loans
Notes 2023 £ 2022 £
Reyl loan (i)
23,145,127
22,152,484
Kingdom Trust
-
9,572,412
Solana seed (ii)
92,117,829
9,588,974
OTC Trades (iii)
7,761,682
4,307,428
Algorand Foundation (iv)
2,734,526
2,039,791
STX loan
-
357,467
FlowBank SA
-
273,312
Other borrowings
54,306
258,845
Amounts due to exchange (v)
5,335,392
-
Fund liabilities to external investors (vi)
937,143
-
132,086,005
48,550,713
Payable within one year 108,940,878
27,116,746
Payable in more than one year 23,145,127
21,433,967
COINSHARES
2023 ANNUAL
REPORT
100 | 135
01
02
03
04
05
06
07
08
(i) The Group has a loan balance to Reyl & Cie Ltd (“Reyl Bank”) in the sum of CHF 24,740,000
(£23,097,200) (2022: CHF 24,740,000 (£22,115,017)) plus accrued interest of CHF 51,336 (£47,927)
(2022: CHF 41,914 (£37,467)). The loan bears interest at a rate equal to the interest base rate SARON 1
to 3 months, that cannot fall below 0% per annum, plus a credit margin of 2.25% and internal costs of
the Bank for making the liquidity available to the Group during the entire loan duration with a minimum
of 0.20% per annum. The ultimate maturity date of the loan is 10 March 2027.
The Group holds assets with Reyl Bank in the form of authorised unissued ETP certificates that
amounted to a market value as at 31 December 2023 of £285,696,472 (2022: £124,585,188), a portion
of which will stay with Reyl Bank until the loan balance has been fully settled. Custodial fees of 0.08%
on the average value of the portfolio during the period are charged by Reyl Bank on a quarterly basis
on the ETP certificates provided.
(ii) The balance represents the value of 10,000,000 certificates in CoinShares Physical Staked Solana
which are held by the Group on behalf of a third party who contributed 1,000,000 SOL of seed capital
to the product. This amount is hedged in full by physical Solana within CSDSL.
(iii) The balance represents the sterling equivalent value of OTC liabilities in the course of settlement
at the balance sheet date. This balance is hedged by digital assets held.
(iv) The balance represents the value of 1,500,000 certificates in CoinShares Physical Staked Algorand
which are held by the Group on behalf of a third party, who contributed 15,000,000 ALGO of seed
capital to the product. This balance is hedged by digital assets held.
(v) Amounts due to exchanges balances due to exchanges as at year end that are settled in digital
assets.
(vi) Fund liabilities due to external investors arise from investments made by third parties into the
Group’s Bitcoin and Ethereum Integrated Strategies Funds (‘BIS’ and ‘EIS’ respectively) which
currently are consolidated within the Group until such a time as they garner sufficient inflow to trigger
deconsolidation.
--
COINSHARES
2023 ANNUAL
REPORT
101 | 135
01
02
03
04
05
06
07
08
10. Non-financial assets and liabilities
(a) Property, plant and equipment
Right-of-use
property
assets £
Furniture
and Fittings
£
Office
Equipment
£
Total
£
Cost
At 31 December 2022 2,919,836 645,753 551,146
4,116,735
Additions 3,008,294 47,328 61,658
3,117,280
Disposals (2,906,691) (1,143) (57,013)
(2,964,847)
Exchange differences (13,145) - (5,715)
(18,860)
At 31 December 2023 3,008,294 691,938 550,076 4,250,308
Accumulated depreciation
At 31 December 2022 1,388,614 496,858 295,401
2,180,873
Charge for the year 1,221,439 75,293 126,326
1,413,058
Disposals (2,328,814) (1,143) (70,789)
(2,400,746)
Exchange differences (6,119) - (2,310)
(8,429)
At 31 December 2023 265,120 571,008 348,628 1,184,756
Net book value
At 31 December 2023 2,743,174 120,930 201,448 3,065,552
At 31 December 2022 1,531,222 148,895 255,745 1,935,862
Accounting policies
Assets are initially recognised at cost and subsequently measured at cost, net of depreciation and
any impairment losses. Cost includes the original purchase price plus costs directly attributable to
bringing the asset to its working condition for its intended use.
Subsequent expenditure relating to an item of property, plant and equipment that has already been
recognised is added to the carrying amount of the asset only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repair and maintenance expenses are recognised in profit and loss as incurred.
A right-of-use asset is recognised at commencement of the lease and initially measured at the amount
of the lease liability, plus any incremental costs of obtaining the lease and any lease payments made at
or before the leased asset is available for use by the Group.
The right-of-use asset is subsequently measured at cost less accumulated depreciation and any
accumulated impairment losses. Right-of-use assets are depreciated straight line over the following
useful economic periods:
All right-of-use assets for the periods reported relate to property rights obtained as part of lease
arrangements (see note 10(b)).
COINSHARES
2023 ANNUAL
REPORT
102 | 135
01
02
03
04
05
06
07
08
Depreciation is calculated using the straight-line method to allocate their depreciable amounts over
their estimated useful lives as follows:
• Furniture and fittings – 3 years
• Office equipment – 3 years
• Right-of-use property assets – shorter period of the remaining lease term or useful economic life
The residual values, estimated useful lives and depreciation method of property, plant and equipment
are reviewed, and adjusted as appropriate, at each year end. The effects of any revision are recognised
in profit and loss when the changes arise.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and are recognised in profit and loss in the period of disposal.
The right-of-use asset is adjusted for any re-measurement of the lease liability and lease modifications,
as set out in the lease accounting policy.
Key accounting estimate
Useful life of property, plant and equipment
The Group has property, plant and equipment assets that are depreciated over their useful lives. The
useful life has been estimated based on expected use of the asset.
(b) Leases
Lease commitments for short-term leases at 31 December were as follows:
Less than
1 year
£
1 to 5
years
£
Over
5 years
£
Total at
31 December
2023 £
Jersey property leases 201,835 911,664 -
1,113,499
London property leases 504,796 1,729,335 -
2,234,131
706,631 2,640,999
-
3,347,630
2023 £ 2022 £
Serviced office lease
190,737
41,320
190,737
41,320
The group entered into a short-term lease contract for an office in Paris on 5 July 2023 for one year
commencing from November 2023. This agreement has replaced the financing lease arrangements in
place for offices in Paris discussed below. The total expense relating to short-term leases for the year
was £166,734 (2022: £81,108).
The maturity of gross contractual undiscounted cash flows due on the Group’s lease liabilities is set
out below based on the period between 31 December 2023 and the lease maturity date.
COINSHARES
2023 ANNUAL
REPORT
103 | 135
01
02
03
04
05
06
07
08
The Group leased the second and third floors of a property for its operations in Jersey, and two
properties for its operations both in London and Paris during the period. The movement in right-of-
use assets obtained as a result of lease arrangements and their associated depreciation charges are
disclosed in note 10(a).
The lease for the second floor of the property in Jersey commenced on 1 January 2019 and was
voluntarily concluded on 1 June 2023. The lease for the third floor commenced on 1 December 2017
and was also terminated on 1 June 2023, the contractual lease end date. The Group has agreed to
continue to rent the same office space under a new lease which commenced on 2 June 2023. The
new lease has a term of six years and break clause options at the end of year 2 and 4; the Directors
have no intention of exercising either option at the transition date. Accounting for both leases is
therefore on the basis of future cash flows on rental payments up to the contractual lease end date
of 1 June 2029.
On 4 September 2023 the Group ended an agreement with Brevan Howard Asset Management LLP
for the underlease of 82 Baker Street, London, W1U 6TE. The Group entered into a new lease at 3
Lombard Street, London EC3V 9AQ on 2 August 2023. The lease term is five years, commencing on 2
August 2023 and with an end date of 1 August 2028.
The Group leased two offices in Paris during the year, 11 rue Paul Lelong, from the point of acquisition
of CSF in 2021 and 25 rue du 4 Septembre from 1 August 2022, with a contractual end dates of 4 April
2023 and 31 August 2023 respectively. Both leases were terminated during the period and CSF has
since entered into a short-term lease which is discussed above.
Jersey
property
leases £
London
property
leases £
Paris
property
leases £
Total
£
At 31 December 2022 101,062 882,770 352,655 1,336,487
Additions 1,061,901 1,946,393 -
3,008,294
Disposals (92,374) (262,751) (348,200)
(703,325)
Repayments (122,016) (622,203) -
(744,219)
Interest expense 30,934 44,189 2,743
77,866
Exchange differences - - (7,198)
(7,198)
At 31 December 2023 979,507 1,988,398 - 2,967,905
Changes in liabilities arising from financing activities
COINSHARES
2023 ANNUAL
REPORT
104 | 135
01
02
03
04
05
06
07
08
Accounting policies
The Group as lessee
On commencement of a contract (or part of a contract) which gives the right to use an asset for a
period of time in exchange for consideration, the group recognises a right-of-use asset and a lease
liability unless the lease qualifies as a ‘short-term’ lease or a ‘low-value’ lease.
Short-term leases
Where the lease term is twelve months or less and the lease does not contain an option to purchase the
leased asset, lease payments are recognised as an expense on a straight-line basis over the lease term.
Leases of low-value assets
Where the underlying asset in a lease is ‘low-value’, lease payments are recognised as an expense on
a straight-line basis over the lease term. Low-value leases are deemed to be leases under £50,000.
Initial measurement of the lease liability
The lease liability is initially measured at the present value of the lease payments during the lease term
discounted using the incremental borrowing rate because the interest rate implicit in the lease cannot
be readily determined.
The lease term is the non-cancellable period of the lease plus extension periods that are reasonably
certain to exercise and termination periods that are reasonably certain not to exercise.
Lease payments include fixed payments, less any lease incentives receivable, variable lease payments
dependent on an index or a rate and any residual value guarantees. Variable lease payments are initially
measured using the index or rate when the leased asset is available for use.
Subsequent measurement of the lease liability
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining
balance of the lease liability and reduced for lease payments. Interest on the lease liability is recognised
in profit or loss.
The Group has an operating lease arrangement in which it acts as a lessor in relation to office space
sub-leased to a related party. The lease agreement includes a 2 month break clause option which is
exercisable by either party.
Maturity analysis of operating lease payments:
2023 £ 2022 £
Within one year
22,000
22,000
22,000
22,000
During the year, the Group received lease income on operating leases amounting to:
2023 £ 2022 £
Operating lease rental income
132,000
132,000
132,000
132,000
COINSHARES
2023 ANNUAL
REPORT
105 | 135
01
02
03
04
05
06
07
08
Re-measurement of the lease liability
The lease liability is adjusted for changes arising from the original terms and conditions of the lease
that change the lease term, the assessment of options to purchase the leased asset, the amount
expected to be payable under a residual value guarantee and/or changes in lease payments due to a
change in an index or rate. The adjustment to the lease liability is recognised when the change takes
effect and is adjusted against the right-of-use asset, unless the carrying amount of the right-of-use
asset is reduced to nil, when any further adjustment is recognised in profit or loss.
Adjustments to the lease payments arising from a change in the lease term or the assessment of its
option to purchase the leased asset are discounted using a revised discount rate. The revised discount
rate is calculated as the incremental borrowing rate at the date of the reassessment because the
interest rate implicit in the lease cannot be readily determined.
Lease modifications
A lease modification is a change that was not part of the original terms and conditions of the lease and
is accounted for as a separate lease if it increases the scope of the lease by adding the right to use one
or more additional assets with a commensurate adjustment to the payments under the lease.
For a lease modification not accounted for as a separate lease, the lease liability is adjusted for the
revised lease payments, discounted using a revised discount rate.
Where the lease modification decreases the scope of the lease, the carrying amount of the right-of-
use asset is reduced to reflect the partial or full termination of the lease. Any difference between the
adjustment to the lease liability and the adjustment to the right-of-use asset is recognised in profit or
loss.
For all other lease modifications, the adjustment to the lease liability is recognised as an adjustment
to the right-of-use asset.
The Group as lessor
Leases are classified as finance or operating leases. Whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance
lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two
separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-
of-use asset arising from the head lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant
lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
Critical judgement
Measurement of IFRS 16 lease liabilities and right-of-use assets
The directors have exercised a number of judgements in order to measure lease liabilities and right-
of-use assets under IFRS 16, including the determination of the lease term and discount rate. The
carrying value of the lease liabilities and right-of-use assets at the reporting date are shown on the face
of the Statement of Financial Position within notes 10(a) and 10(b) respectively.
--
COINSHARES
2023 ANNUAL
REPORT
106 | 135
01
02
03
04
05
06
07
08
(c) Goodwill
£
Cost
At 31 December 2022 6,417,009
Exchange differences (1,977)
At 31 December 2023 6,415,032
Accumulated impairment losses
At 31 December 2022 5,473,525
Loss for the year -
At 31 December 2023 5,473,525
Net book value
At 31 December 2023 941,507
At 31 December 2022 943,484
The Group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired. Goodwill is impaired if the recoverable amount falls below the carrying
amount of the CGU in question.
The recoverable amount for a CGU is defined as the higher of fair value less costs of disposal or value
in use.
For CoinShares Asset Management (‘CSAM’), the goodwill amount of £903,573 relates to the value
of the regulatory licenses held by the Group’s French entities. No impairment charge has been made
during the year due to the retention of the license and the estimated cost to replace.
For CoinShares Co, the recoverable amount is considered to be reasonable due to the value in use
of relevant broker/dealer licenses being justifiable, and should the license be relinquished the costs
involved in replacing this would be in excess of this amount.
Goodwill impairment charges and reversal of impairment charges are recognised in administrative
expenses in the statement of comprehensive income.
The carrying value of goodwill has been allocated to Cash Generating Units (‘CGUs’) as follows:
2023 £ 2022 £
CoinShares AM - AMF regulatory status
903,573
903,573
CoinShares Co - broker/dealer license
37,934
39,911
941,507
943,484
COINSHARES
2023 ANNUAL
REPORT
107 | 135
01
02
03
04
05
06
07
08
Accounting policies
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of
impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of
cash-generating units) expected to benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired. If the recoverable amount of the cash-
generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised
for goodwill is not reversed in a subsequent period.
On disposal of a cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
(d) Other intangible assets
Fee Generating
Contracts £
Software
£
Website
Domains and
Trademarks £
Total
£
Cost
At 31 December 2022 12,180,776 880,298 209,769
13,270,843
Additions - 1,185,665 9,398
1,195,063
Disposals - (85,225) (206,265)
(291,490)
Exchange differences - (6,676) -
(6,676)
At 31 December 2023 12,180,776 1,974,062 12,902 14,167,740
Accumulated amortisation
At 31 December 2022 2,125,727 86,184 10,484
2,222,395
Charge for the year 1,563,972 221,850 1,743
1,787,565
Additions - 12,325 109
12,434
Disposals - (35,279) (10,015)
(45,294)
Exchange differences 230,115 244,014 -
474,129
At 31 December 2023 3,919,814 529,094 2,321 4,451,229
Net book value
At 31 December 2023 8,260,962 1,444,968 10,581 9,716,511
Accounting policies
Intangible assets acquired in a business combination and recognised separately from goodwill are
recognised initially at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported
at cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Expenditure on the research phase of projects to develop new customised software is recognised as
an expense as incurred.
COINSHARES
2023 ANNUAL
REPORT
108 | 135
01
02
03
04
05
06
07
08
Costs that are directly attributable to a project’s development phase are recognised as intangible
assets, provided they meet all of the following recognition requirements:
• the development costs can be measured reliably;
• the project is technically and commercially feasible;
• the Group intends to and has sufficient resources to complete the project;
• the Group has the ability to use or sell the software; and
• the software will generate probable future economic benefits.
Development costs not meeting these criteria for capitalisation are expensed as incurred.
Directly attributable costs include employee costs incurred on software development along with an
appropriate portion of relevant overheads and borrowing costs.
Separately acquired intangible assets have finite useful lives and are measured at cost less
accumulated amortisation and accumulated impairment losses. Amortisation of the depreciable
amount is allocated systematically on the basis of the consumption of economic benefits over their
estimated useful lives.
Amortisation is provided on the following basis:
• Fee generating contracts 10 years
• Software 3-5 years
• Website domain names and trademarks 10 years
The estimated useful life and amortisation method are reviewed at the end of each year, with the effect
of any changes in estimate being accounted for on a prospective basis.
Any capitalised internally developed software that is not yet complete is not amortised but is subject
to impairment testing.
Amortisation has been included within administrative expenses.
Subsequent expenditures on the maintenance of these assets are expensed as incurred.
When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference
between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within
other gains or losses.
Impairment of non-financial assets
Goodwill impairment is covered in the goodwill accounting policy. All other non-financial assets are
tested for impairment whenever there is any objective evidence or indication that these assets may be
impaired.
If such an indicator exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
The recoverable amount is the higher of value in use and fair value less costs of disposal. If the
recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised immediately in profit and loss.
--
COINSHARES
2023 ANNUAL
REPORT
109 | 135
01
02
03
04
05
06
07
08
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of the recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined if no impairment loss
had been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment
loss is recognised immediately as a credit to profit and loss.
Key accounting estimate
Useful life of intangible assets
The Group has intangible assets that are amortised over their useful lives. The useful life has been
estimated based on expected obsolescence of the assets that are amortised.
11. Equity
(a) Share capital and premium
2023
Number
2022
Number
2023
£
2022
£
Shares classified as equity
Ordinary shares of £0.000495 each
68,013,771
68,213,821
33,667
33,766
68,013,771
68,213,821
33,667
33,766
Allotted, called-up and fully paid
2023 £ 2022 £
Share premium
30,690,938
30,781,210
30,690,938
30,781,210
Ordinary shares issued and allotted are accounted for as equity. These shares confer on the holders
the right to vote and receive dividends at the Company’s discretion. If, at the Company’s discretion,
there is a return of assets, ordinary shares confer on the holders thereof the rights in respect of the
assets of the Company available for distribution among the Shareholders. The Company is authorised
to issue 200,000,000 shares.
All share premium balances relate to the issue of ordinary shares.
Movements in share capital
Number £ £
As at 31 December 2022 68,213,821 33,766 30,781,210
Share cancellation - 11 January 2023 (78,396) (39) (35,376)
Share cancellation - 31 August 2023 (121,654) (60) (54,896)
As at 31 December 2023 68,013,771 33,667 30,690,938
Share Capital
Share Premium
COINSHARES
2023 ANNUAL
REPORT
110 | 135
01
02
03
04
05
06
07
08
The Group purchased 1,597,706 (2022: 78,396) shares on the public market for a total consideration
of £4,216,180 (2022: £228,383) for the purposes outlined at the Group’s last AGM. The shares are held
in the Treasury Share Reserve, included within other reserves (note 11(b)), until they are cancelled or
sold back to the market.
Accounting policies
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction from the proceeds.
During the year, the Company undertook a purchase of its own shares already in issue. The consideration
paid, including any directly attributable incremental costs, is deducted from equity attributable to the
owners as treasury shares until the shares are cancelled or reissued.
(b) Other reserves
Included within other reserves in the Group are the following:
Revaluation
Reserve
£
Foreign
Exchange
Translation
Reserve £
Share
Option
Reserve
£
Treasury
Share
Reserve
£
Total
£
At 31 December 2022 - 19,331,359 3,033,296 (228,383) 22,136,272
Exchange differences
on translation of foreign
operations
499,715,307 (8,192,795) - -
491,522,512
Share based payments - - 1,324,818 -
1,324,818
Share buybacks - - - (4,216,180)
(4,216,180)
Share cancellations - - - 551,399
551,399
Share options exercised - - (5,863) 13,530
7,667
Share option liquidations - - (28,277) -
(28,277)
Transfers to retained
earnings
(57,188,124) - - -
(57,188,124)
At 31 December 2023 442,527,183 11,138,564 4,323,974 (3,879,634) 454,110,087
The nature and purpose of each reserve in equity is described as follows:
Share premium
The share premium account represents the premium paid on the issue of ordinary shares in excess
of their nominal value.
Retained earnings
The retained earnings reserve contains the Group’s cumulative profit or loss, net of distributions to
owners. Net cumulative gains on financial instruments and investments held at fair value through
other comprehensive income are shown in retained earnings.
Revaluation reserve
Net cumulative gains on digital assets held at fair value through other comprehensive income are
shown in the revaluation reserve. When digital assets are disposed of, the gains associated with those
assets in the revaluation reserve are transferred to retained earnings.
COINSHARES
2023 ANNUAL
REPORT
111 | 135
01
02
03
04
05
06
07
08
Foreign exchange translation reserve
Foreign exchange gains and losses on translation of the results and net assets of the Group’s foreign
operations accumulate in the foreign exchange translation reserve. On disposal of foreign operations,
the cumulative translation gains and losses in respect of those operations are recycled through profit
or loss.
Share option reserve
The share option reserve represents the cost of the Group’s cumulative unexercised share options.
Once options are exercised, the cumulative expense in relation to those options is transferred to
retained earnings.
Treasury share reserve
The treasury share reserve represents the considerations paid by the Group to repurchase its own
shares until such a time that the shares are cancelled or sold back to the market.
RISK
12. Critical estimates, judgements and errors
The preparation of the Group financial statements requires management to make judgements,
estimates and assumptions in applying accounting policies to determine the reported amounts of
assets, liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various factors, including expectations of future events that are believed to
be reasonable under the circumstances. Actual results may differ significantly from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
(a) Critical Judgements
Accounting treatment of digital assets - note 8
Accounting treatment of ETPs - note 9(f)
Measurement of IFRS 16 lease liabilities and right-of-use assets - note 10(b)
(b) Key accounting estimates and assumptions
Valuation of investments - note 9(d)
Useful life of property, plant and equipment - note 10(a)
Useful life of intangible assets - note 10(d)
Share based payment costs - note 20
13. Financial risk management objectives and policies and capital management
The Group invests in a portfolio of digital assets and derivatives on a non-directional risk basis to
generate a return, which matches its financial obligations to certificate holders. In pursuing its
investment objective, the Group invests in digital assets and has a liability exposure towards certificate
holders linked to digital assets, as well as the specific operational risks to trading and holding digital
assets.
The following sets out a description of the principal risks inherent in the activities of the Group along
with the action taken to manage these risks.
--
COINSHARES
2023 ANNUAL
REPORT
112 | 135
01
02
03
04
05
06
07
08
(a) Market risk
i) Currency risk
The Group seeks to mitigate currency risk, primarily experienced within its subsidiary CSCMJL.
CSCMJL automatically converts amounts received in EUR and SEK from the sale of certificates
by investors to US$. US$ is the functional currency of CSCMJL which automatically converts US$
to EUR and SEK as required to facilitate the redemption of notes. From time to time CSCMJL
may hold small currency balances in currencies other than US$ to facilitate operational expenses
and occasionally holds EUR on a temporary basis for the purchase of digital assets. On the basis
of the above information, the Group believes currency risk is not material. Currency risk in CSCMJL
represents the most significant area of risk for the Group as a whole. However, given the functional and
presentational currency of the Group is Pound Sterling, additional foreign currency movements arise
on consolidation and with equity accounting of its foreign operations (as defined under IAS21) which
result in movements through other comprehensive income.
ii) Interest rate risk
Interest rate risk is the risk that the value of the Group will be impacted by fluctuations in the prevailing
levels of market interest rates.
The Group has entered into a loan arrangement with a variable interest rate based on the base rate
SARON 1 to 3 months. The directors have determined that as there is one loan, that this risk of the
interest rate moving against the Group is acceptable. The loan renews for periods of 12 months at a
time, so if the risk were determined to be too great, the Group could exit the arrangement, using other
assets to pay the loan if necessary.
The majority of the Group’s other financial assets and liabilities are either non-interest bearing, or
at a fixed interest rate and as a result, the Group is not subject to significant amounts of risk due to
fluctuations in the prevailing levels of market interest rates.
The directors have considered the impact of movements in the SARON 1 to 3 months interest base
rate. A 5% increase/decrease in the base rate would increase/decrease the Group’s annual interest
cost in relation to the Reyl Loan to approximately £980,427 (CHF 1,078,046)/£887,053 (CHF 975,375)
(2023 actual £885,720 (CHF 988,074)) and does not create any going concern issues.
iii) Digital asset price risk
Digital assets are an extremely volatile asset class. Digital asset price risk arises from the uncertainty
about future prices of the digital assets, impacting both the fair value of the digital assets held by the
Group and the fair value of the liabilities of the Group towards certificate holders.
To mitigate its exposure to changes in prices of digital assets, any exposure to changes in prices on the
digital assets held is matched by the changes in value of the obligations to security holders. The Group
does hold some strategic digital asset balances for its own account over and above the amounts
required to hedge its obligations. Movement in digital asset prices is illustrated in the sensitivity
analysis presented in note 13(e).
Reports are circulated every ten minutes showing the net digital asset exposure. In addition, the net
exposure is constantly monitored, being the number of digital assets held versus the number of
currencies required to cover the exposure towards certificate holders.
--
COINSHARES
2023 ANNUAL
REPORT
113 | 135
01
02
03
04
05
06
07
08
iv) Risk of access to banking services
The banking landscape and availability of banking partners for participants within the digital asset
industry is ever-evolving, as has been evidenced by events following the financial year end. The Group
has a variety of banking partners and is continually seeking additional, suitable partners to further
mitigate the risk of over-reliance on a single or limited number of counterparties.
The operations of the Group are reliant on the availability of efficient payment rails, particularly in
the requirement to perform the hedging activities associated with the Group’s XBTP ETPs. No issues
have arisen to date arising from banking capabilities that have proven to have a significant operational
impact on the Group, and the continued expansion of our banking relationships is designed to ensure
that this remains the case as we continue to grow.
(b) Credit risk
Credit risk is the risk that an issuer, counterparty or exchange will be unable or unwilling to meet a
commitment, obligation under a financial instrument or contract that it has entered into with the Group,
leading to a financial loss, or lack of liquidity and restriction of access to the Group’s assets. The Group
is exposed to credit risk due to the range of counterparties with which it is required to interact.
Certain transactions that the Group may enter into exposes it to the risk that the counterparty will not
deliver the asset (purchase) or cash (sale) after the Group has fulfilled its responsibilities. The Group
only transacts with brokers which have been approved by the Group as acceptable counterparties.
Digital assets and exchanges
Digital asset activity has an inherent credit risk due to the nature of the industry, which is non-
regulated, extremely volatile, has low barriers to entry and is vulnerable to bad actors. The Group has
implemented a range of controls, policies and procedures around the trading and holding of digital
assets on exchange, and ultimately the Group now holds a significant amount of digital assets with
digital asset custodians 70% (2022: 85%). Additional measures undertaken by the Group include
enhanced on-boarding, compliance and risk reviews and/or utilising exchanges which are audited
and report sufficient liquid positions (LMAX and Coinbase). This is designed to ensure only reputable,
long-standing and mature exchanges are used.
Financial instruments and cash deposits
Credit risk from balances with banks, brokers and financial institutions is managed, monitored and
controlled by the finance department in accordance with Group policy. Transactions that involve
surplus cash inflows and outflows are only with approved counterparties and brokers within credit
limits that have been agreed between the parties. The credit limits are reviewed by the compliance
team and agreed upon by the Board of Directors on an annual basis. The limits are set to minimise
the concentration of risks and therefore mitigate financial loss. Furthermore, regular risk reviews are
performed over the use of the banks and brokers to manage credit risk.
Transactions that expose the Group to the risk that the counterparty will not deliver the asset (purchase)
or cash (sale) after the Group has fulfilled its responsibilities, is managed through brokers which have
been approved by the Group as acceptable counterparties.
The Group also has receivables as a result of loans. The Company only enters into loans with reputable
counterparties and in the case of digital asset loans these are all recallable on demand. The Company
therefore does not expect to incur material losses with these loans.
--
COINSHARES
2023 ANNUAL
REPORT
114 | 135
01
02
03
04
05
06
07
08
The Group undertakes transactions with counterparties that may expose it to the risk that the
counterparty will not deliver from their side, for example in the cases of sales (cash), purchases
(assets) or equivalent loans. The Group mitigates this by reviewing counterparties before transactions
occur, and determining their acceptability, with the use of collateral where deemed necessary. In
the event that such a transaction is ongoing, such assessments are regularly performed in order to
safeguard assets and mitigate any risks arising in relation to recoverability.
Included in other assets disclosed in note 9(b) are shares in ETPs, valued at £211,384,245 (2022:
£96,788,146) used to provide exposure to digital assets and are held as a part of the Group’s collateral
management obligations. These ETPs are fully collateralised and management maintains regular
communications with their operators. The ETPs are regulated and audited.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with
financial liabilities, in particular towards certificate holders.
The following maturity analysis shows that liquidity risks are dealt with through matching the maturity
of the assets and liabilities.
Carrying amount as at
31 December 2023 £
On demand
£
Less than
3 months £
More than
3 months £
Current assets
Trade and other receivables 2,241,203 - 2,241,203 -
Cash and cash equivalents 25,507,944 25,507,944 - -
Digital assets* 2,375,850,359 2,375,850,359 - -
Other assets 266,093,775 266,093,775 - -
Total current assets
2,669,693,281 2,667,452,078 2,241,203 -
Carrying amount as at
31 December 2023 £
On demand
£
Less than
3 months £
More than
3 months £
Current liabilities
Accounts payable 1,004,360 1,004,360 - -
Accrued liabilities 4,607,858 - 4,607,858 -
Certificate liability 2,351,475,523 2,351,475,523 - -
Current tax liability 156,970 - - 156,970
Lease liabilities 563,633 - - 563,633
Amounts due to brokers 669,402 669,402 - -
Other liabilities 108,940,878 - 108,940,878 -
Total current liabilities
2,467,418,624 2,353,149,285 113,548,736 720,603
Net current assets/
(liabilities)
202,274,657 314,302,793 (111,307,533) (720,603)
* As disclosed in note 8 digital assets are not financial instruments however there is an active market
and they are readily realisable on demand.
COINSHARES
2023 ANNUAL
REPORT
115 | 135
01
02
03
04
05
06
07
08
Pursuant to contractual agreements between certificate holders and the Group, the Group is providing
hedging services to certificate holders by buying digital assets to match the liabilities of the Group.
Liquidity issues could arise as a result of the redemption of certificates. In this case, the Group would
be required to have sufficient liquidity to finance the redemption of the certificates. The prospectus
and final terms for each series of notes issued by XBTP define the formula at which the certificates
can be redeemed based on an average of the price of the reference digital assets on three different
exchanges to provide the contractual exposure defined in the final terms.
The terms and conditions of the certificates include provisions under which, upon the occurrence
of certain market disruptions, delays in the settlement of the certificates may be incurred or certain
modifications be made. Each certificate holder may exercise the holder put option and have their
certificates redeemed on the tenth business day following the end of the calendar month after the
month of the exercise of the notice, in case the calculation agent determines that an asset disruption
event has occurred, the certificates’ redemption will be postponed until the asset disruption event
ceases. These contractual provisions would also act as liquidity risk mitigating factor for the Group.
In the first instance, the cash held at brokers, and then the cash atbank would be used, while
the proceeds from the sale of the digital assets would be transferred to pay the noteholders.
Liquidity would thereafter be generated by trading the digital assets already held at the exchanges. The
float of digital assets held at the exchanges is monitored in real time by the trading team to make sure
that the float is sufficient to deal with possible redemption requests. When the trading team believes
that more digital assets are required, digital assets held in cold storage with Komainu and Zodia (2022:
Komainu and Zodia) are transferred within 48 hours to the exchanges. Conversely, when the amount
of digital assets held at exchange is in excess of the liquidity requirements, then digital assets are
transferred to cold storage with Komainu and Zodia (2022: Komainu and Zodia).
The liquidity risk is further mitigated by only holding the most liquid digital assets, Bitcoin and
Ethereum, for the purpose of hedging the notes.
For the securities held by CSDSL, liquidity issues could arise as a result of the redemption of securities,
however only if these were to be redeemed in cash rather than in digital asset. The prospectus defines
when this could occur
, but is the exception rather than the rule. In this case, the Group would be
required to have sufficient liquidity to finance the redemption of the securities. The prospectus and
final terms for each security define the formula at which the securities can be redeemed based on a
coin entitlement.
Securities holders can request redemption of their securities which will be settled two business days
following a valid redemption notice. The Group ensures that it holds the relevant digital asset at all
times to be able to meet these redemptions.
(d) Capital risk management
The capital of the Group is represented by the net assets attributable to ordinary shareholders. The
Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain a strong capital base to support the development of the investment activities of the Group.
This is achieved through actively managing the Group’s Bitcoin, Ethereum and related products.
For the purpose of the Group’s capital management, capital includes issued share capital, share
premium and all other equity reserves attributable to the equity holders of the parent. The primary
objective of the Group’s capital management is to maximise the shareholder value.
--
COINSHARES
2023 ANNUAL
REPORT
116 | 135
01
02
03
04
05
06
07
08
The Group manages its capital structure and makes adjustments in light of changes in economic
conditions and the requirements of the financial covenants. To maintain or adjust the capital structure,
the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue
new shares.
The Group monitors capital using a gearing ratio, which is ‘net debt’ divided by total capital plus net
debt. The Group has minimal debt and has a policy of keeping the gearing ratio as low as possible.
No changes were made in the objectives, policies or processes for managing capital during the years
ended 31 December 2023 and 2022.
Financial instruments settled through digital assets
The Group has entered into perpetual and futures contracts with digital asset exchanges. These
contracts offer synthetic exposure to digital assets while reducing working capital requirements.
A perpetual futures contract is a derivative product that is similar to a traditional futures contract, but
has a few differing specifications:
1. There is no expiry or settlement; and
2. Perpetual contracts mimic a spot market and hence trade close to the underlying digital asset
price. This is in contrast to a traditional futures contract which usually trades at a different price
due to the time basis or time until maturity of the contract. The primary mechanism to tether the
perpetual futures contract to the spot price is an interest funding mechanism.
The following table shows positions held as at 31 December 2023, inclusive of any unrealised gains/
losses and margins held.
Contract
amount (DA)
Margin
held £
Unrealised
gain/(loss) £
Impact on other
current liabilities £
Perpetual Contracts
BTC exposure (420) 4,150,258 (1,367,201) (1,367,201)
ETH exposure (3) 1,791 (2,367) (2,367)
Futures Contracts
BTC exposure 239 2,662,175 (424,110) (424,110)
ETH exposure 191 115,123 (8,770) (8,770)
6,929,347 (1,802,448) (1,802,448)
In order to maintain the above positions, equity is held with the exchanges. The funding and settlement
of Perpetual Contracts can only be done in digital currency, there is no fiat currency settlement.
(e) Operational risk
These are risks relating to losses as a result of operational matters such as having inappropriate or
insufficient routines, human error, systems failures and legal risks.
The main operational risk for the Group would be the inability to provide the contractual hedge
through either systems failures or continuity planning issues. The risk is mitigated through the use of
a highly secure algorithmic trading platform hosted in the cloud to mitigate the risk of human error.
The business continuity plan was tested, and demonstrated that the traders can perform their work
from anywhere.
COINSHARES
2023 ANNUAL
REPORT
117 | 135
01
02
03
04
05
06
07
08
The Group has controls designed to monitor transactions, and flag any possible inconsistencies in
trading, acting as further mitigating factors for human error.
The risk of hacking, and losing Bitcoin/Ethereum and other digital assets in digital wallets due to fraud
is reduced through the majority of the digital assets being kept in cold storage with Komainu and Zodia
(2022: Komainu and Zodia), providing a cold storage vault. Komainu has a SOC 1 Type 2 report, the latest
covering the period from 1 December 2021 to 30 November 2022, which was independently reviewed
by PricewaterhouseCoopers CI LLP and authorised for issue on 31 March 2023. Zodia currently has a
SOC 1 Type 1 report and a SOC 1 Type 2 report for the period 1 January 2022 to 31 December 2022. A
SOC 1 Type 2 report for the period 1 January 2023 to 31 December 2023 is in progress and expected to
be completed in Q1 2024. Both Komainu and Zodia are also ISO27001 certified. In addition to limiting
the exposure to fraud for the Group, cold storage of digital assets with Komainu and Zodia also reduces
the exposure to hacking of the exchanges. The exchanges are constantly monitored and the Group has
built a net asset buffer which reduces operational risk.
The cyber risks are mitigated through the use of systems to prevent external attacks (firewalls,
detection of possible phishing emails, encryption using secure keys and strong physical security for
example).
Carrying amount as at
31 December 2023 £
Price change
-50% £
Price change
100% £
Assets
Bitcoin 1,372,851,942 736,326,309 2,645,903,207
Ethereum 816,970,454 438,545,077 1,573,821,207
Other digital assets 187,359,577 93,679,789 374,719,154
Other assets 355,031,055 221,984,167 621,124,830
Total assets
2,732,213,028 1,490,535,343 5,215,545,664
Liabilities
Certificate liability (2,351,475,523) (1,175,737,762) (4,702,951,046)
Other liabilities (141,492,500) (88,914,161) (246,649,177)
Total liabilities
(2,492,968,023) (1,264,651,923) (4,949,600,223)
Net assets 239,245,005 225,883,420 265,968,175
The above analysis shows the impact of both a fifty percent decline and a one hundred percent
increase in digital assets prices. A 50% decline in digital asset prices would reduce the Group’s net
asset position to £227.0 million (2022: £166.5 million) and does not create any going concern issues.
COINSHARES
2023 ANNUAL
REPORT
118 | 135
01
02
03
04
05
06
07
08
GROUP STRUCTURE
14. Business combinations
The Group acquired Larks Leaf Asset Management (Jersey) Limited (‘LLAMJL’) for a consideration of
£82,909 on 27 February 2023 with the intention of assuming and expanding upon its fund operations.
LLAMJL held no assets or liabilities at the acquisition date.
After applying the optional concentration test under IFRS 3 the Directors found that LLAMJL is not a
business because substantially all of the fair value of gross assets acquired can be allocated to the
funds launched as a result of the acquisition and their respective strategies, the acquisition therefore
does not constitute a business combination.
Accounting policies
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interest issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at
their fair value at the acquisition date, except that:
• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 and IAS 19 respectively;
• liabilities or equity instruments related to share-based payment arrangements of the acquiree, or
share-based payment arrangements of the Group entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date; and
• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 are
measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts
of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted during the measurement period
(see above), or additional assets or liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
--
COINSHARES
2023 ANNUAL
REPORT
119 | 135
01
02
03
04
05
06
07
08
15. Interests in other entities
The Company’s direct subsidiaries which make up the Group as at 31 December 2023 are as follows:
Name Defined
as
Investee
Relationship
CSIL’s
Ownership %
Jurisdiction Date of
Acquisition
CoinShares (UK) Limited CSUKL Subsidiary 100% UK 19/04/2017
XBT Provider AB (publ) XBTP Subsidiary 100% Sweden 25/09/2017
CoinShares GP II Limited CSGP2L Subsidiary 100% Jersey 09/02/2018
CoinShares Corporate
Services (Jersey) Limited
CSCSJL Subsidiary 100% Jersey 25/06/2018
CoinShares Co CSCo Subsidiary 100% USA 01/07/2018
CoinShares Employment
Services (Jersey) Limited
CSESJL Subsidiary 100% Jersey 09/08/2018
CoinShares Digital Securities
Limited
CSDSL Subsidiary 100% Jersey 30/06/2020
CoinShares (Jersey) Limited CSJL Subsidiary 100% Jersey 26/09/2018
GABI Trading Limited GTLA Subsidiary 100% Hong Kong 12/02/2019
CoinShares Capital Markets
(Jersey) Limited
CSCMJL Subsidiary 100% Jersey 30/06/2019
CoinShares Capital Markets
(UK) Limited
CSCMUKL Subsidiary 100% UK 30/06/2019
CoinShares Capital, LLC CS Cap Subsidiary 100% USA 18/09/2019
CoinShares GP I LLC CSGPI Subsidiary 100% USA 20/03/2020
CoinShares France CSF Subsidiary 100% France 17/12/2021
CoinShares Asset
Management
CSAM Subsidiary 100% France 04/07/2022
Larks Leaf Asset Management
(Jersey) Limited
LLAMJL Subsidiary 100% Jersey 27/02/2023
CoinShares Bitcoin Integrated
Strategies Master Fund
Limited
BIS
Master
Subsidiary 100% Jersey 27/02/2023
CoinShares Bitcoin Integrated
Strategies Feeder Fund
Limited
BIS
Feeder
Subsidiary 100% Jersey 27/02/2023
CoinShares Ethereum
Integrated Strategies Master
Fund Limited
EIS
Master
Subsidiary 100% Jersey 06/04/2023
CoinShares Ethereum
Integrated Strategies Feeder
Fund Limited
EIS
Feeder
Subsidiary 100% Jersey 06/04/2023
CoinShares Relative Value
Opportunities Master Fund
Limited
RVO
Master
Subsidiary 100% Jersey 06/04/2023
COINSHARES
2023 ANNUAL
REPORT
120 | 135
01
02
03
04
05
06
07
08
CoinShares Relative Value
Opportunities Feeder Fund
Limited
RVO
Feeder
Subsidiary 100% Jersey 06/04/2023
CoinShares Switzerland
AG
CSSAG Subsidiary 100% Switzerland 24/05/2023
CoinShares Bitcoin US
Feeder Fund, LP
BIS US
Feeder
Subsidiary 100% USA 05/06/2023
CoinShares Ethereum US
Feeder Fund, LP
EIS US
Feeder
Subsidiary 100% USA 05/06/2023
CoinShares Relative Value
Opportunities US Feeder
Fund, LP
RVO US
Feeder
Subsidiary 100% USA 27/07/2023
CoinShares Bitcoin GP
Limited
CS BGPL Subsidiary 100% Jersey 29/11/2023
CoinShares Ethereum GP
Limited
CS EGPL Subsidiary 100% Jersey 29/11/2023
CoinShares Relative
Value Opportunities GP
Limited
CS
RVOGPL
Subsidiary 100% Jersey 29/11/2023
CoinShares (Holdings) Limited was dissolved on 10 January 2023.
CoinShares Technologies Limited (formerly GABI Capital Limited) was dissolved on 11 January 2023.
Elwood Asset Management Services Limited and Elwood Asset Management LLP were dissolved on 28
March 2023.
Larks Leaf Data Analytics (UK) Limited was dissolved on 31 October 2023.
As at 31 December 2023, CoinShares (UK) Limited and Larks Leaf Asset Management (Jersey) Limited
were in the process of being dissolved, the former having a final dissolution date of 19 March 2024.
On 10 April 2024 XBT Provider AB (publ) changed its name to Coinshares XBT Provider AB (publ).
COINSHARES
2023 ANNUAL
REPORT
121 | 135
01
02
03
04
05
06
07
08
CONTINGENT ITEMS
16. Commitments
(a) Guarantee
The Group has issued a guarantee in respect of tracker certificates issued by XBTP.
The obligations arising on XBTP from the certificates are managed by CSCMJL, which hedges the
exposure of these liabilities.
CSCMJL has procured a hedge to cover the obligations of XBTP to the certificate holders by having
an identical exposure in digital assets under the terms of the collateral management agreement. At 31
December 2023, CSCMJL recorded a net equity position of £200.4 million (US$255.1 million) (2022:
£155.6 million (US$188.3 million)).
The guarantee could be called in the case of extreme events, such as an operational error, hacking
or fraud impacting the hedging provided by CSCMJL which results in CSCMJL’s net equity being
insufficient to settle XBTP’s obligations. In the opinion of the directors, there are sufficient controls and
processes in place to mitigate such a risk by; (i) holding a float of digital assets at the exchanges which
is monitored by the trading team to ensure there is a sufficient balance to deal with any redemption
requests, (ii) using controls designed to monitor unusual transactions to mitigate factors for human
error, (iii) CSCMJL’s automatic trading system is designed so that exposure to changes in prices of
digital assets are matched by changes in value of the obligations towards XBTP, (iv) limiting exposure
to currency risk by using US$ as the functional currency and hedging foreign currency exposures by
regularly monitoring all foreign currency denominated assets and liabilities, (v) storing the majority of
digital assets offline with an institutional custody service and (vi) using a secure algorithmic trading
platform hosted on the cloud.
As a result of the controls and processes in place, the directors consider that the risk of the guarantee
being called on is very remote, and accordingly there is no provision or liability recorded within these
financial statements.
(b) Offsetting financial assets and financial liabilities
The Group holds 1,313 DGLD (2022: nil) on behalf of MKS. The Group previously held certificates in
the Grayscale Ethereum Trust on behalf of Aventus Protocol Foundation however these were sold on
14 July 2023.
The Group does not receive any economic benefit for holding these assets and the risks associated
with holding these assets remain with the third party. The directors of the Group have elected to offset
these transactions as they judge the inclusion in the statement of financial position would misrepresent
the position of the Group.
2023 £ 2022 £
DGLD
2,129,715
-
Grayscale Ethereum Trust
-
1,046,208
Assets due to third parties
(2,129,715)
(1,046,208)
Total - -
COINSHARES
2023 ANNUAL
REPORT
122 | 135
01
02
03
04
05
06
07
08
17. Events occurring after the reporting period
On 12 January 2024, the Group announced it had exercised the option to acquire Valkyrie Funds LLC,
and that the acquisition was pending the completion of satisfactory due diligence, the finalisation of
necessary legal agreements and final board approval.
On Thursday 11th January 2024 SEC approval was received for the issuance of Valkyrie’s spot Bitcoin
ETF, The Valkyrie Bitcoin Fund (BRRR), which commenced trading on Thursday 11th January 2024 at
09:30 am ET on Nasdaq as part of the first cohort of issuers for such products in the U.S
The offerings of Valkyrie Funds LLC provide exposure to the emerging digital asset class through its
spot Bitcoin ETF $BRRR and other products such as $WGMI, the highest-performing non-leveraged
ETF in 2023 across all sectors and $BTFX, a 2x leveraged Bitcoin futures ETF.
Subsequently, on 12 March 2024, the Group announced the completion of the acquisition of Valkyrie
Funds LLC and the sponsor rights to the Valkyrie Bitcoin Fund, a physically backed Bitcoin ETF. As at 29
April 2024, the products affiliated with Valkyrie represent (excluding a seed amount from CoinShares
of US$320.9 million (£256.7 million)) a combined US$332.5 million (£266.0 million) of assets under
management. The accounting for the transaction is being finalised and will be reflected in the Group’s
financial statements for the period ending 31 March 2024.
On 20 March 2024, the Group issued new share options to employees as part of an employee incentive
plan. A total of 115,000 options were issued at an exercise price of SEK 50.4 and a vesting date of 20
March 2027.
On 10 April 2024, the Company announced it has resolved to declare and pay in four equal instalments
an annual dividend in relation to the strong financial performance for the year ending 31 December
2023 amounting to approximately £9,250,492. The first tranche has an Ex-dividend date of 29 April
2024, a record date of 30 April 2024, and a payment date of 3 May 2024.
In the period since the financial year end there has been a series of further share buy-backs undertaken
by the Company. As at the date of signing a total of 90,205 shares have been bought back at an average
purchase price of SEK 39.37 in the period since 31 December 2023. This equates to total consideration
of SEK 3,552,194 (£261,383).
On 11 January 2024, share options granted relating to a total of 10,446 shares with an exercise price of
£1.43 per share were cancelled pursuant to a deed of cancellation, for total consideration of £11,227.
On 25 January 2024 the Group announced a reduction in the management fees for its CoinShares
Physical Bitcoin product. This move, effective from 1 February 2024, significantly decreased the
management fee from 0.98% p.a. to 0.35% p.a.
On 1 February 2024 the Group announced that it had implemented a 1.25% p.a. staking reward in its
flagship Physical Ethereum ETP, effective 1 February 2024, the latest move in a longer-term strategic
drive to lower costs for European investors looking to enter the digital asset market.
On 17 April 2024, 3iQ (a company in which the Group held 1,137,784 shares as at 31 December 2023
with a total carrying value of £4,396,991) was acquired by a third party. The acquisition resulted in the
disposal of approximately 80% of the Group’s holding, generating cash consideration of approximately
£4.0 million. The Group has retained a residual holding of 268,914 shares.
On 11 November 2022 and 14 November 2022, FTX Trading Ltd. and 101 affiliated entities (collectively,
“FTX”) each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Filing”). As a result
of the Bankruptcy Filing, FTX halted withdrawals on 11 November 2022.
--
COINSHARES
2023 ANNUAL
REPORT
123 | 135
01
02
03
04
05
06
07
08
On 6 February 2024, the Group received a notice of acceptance regarding a claim made to FTX in
respect of assets held on the exchange at the time of its bankruptcy in 2022. These assets were fully
written off by the Group in 2022.
The claim is for US$28,119,093, and a range of digital assets with a value as at the date of bankruptcy
of US$3,269,019, bringing the total claim value on this basis to US$31,388,112.
The Group’s management has determined that the FTX claim represents a contingent asset based on
information received subsequent to 31 December 2023. Whilst a future inflow of assets is ultimately
expected, the value, process, and timing of future distributions from the bankruptcy filing is materially
uncertain and has yet to be determined by a range of factors outside the control of the Group.
Therefore, no asset has been recognised on the balance sheet of the Group at (or subsequent to) the
financial year end, despite the claim having been successfully submitted.
On 19 March 2024 CoinShares (UK) Limited was formally dissolved.
On 10 April 2024 XBT Provider AB (publ) changed its name to CoinShares XBT Provider AB (publ).
In the period following the financial year end, digital asset prices have shown strong price increases.
As at 29 April 2024 Bitcoin stands at £49,809, and Ethereum at £2,532, having increased 48% and
39% respectively since 31 December 2023.
--
COINSHARES
2023 ANNUAL
REPORT
124 | 135
01
02
03
04
05
06
07
08
FURTHER DETAILS
18. Cash flow information
(a) Non-cash investing and financing activities
Non-cash investing and financing activities disclosed in other notes are:
- acquisition and disposal of right of use assets - note 10(a)
- options issued to employees under the equity settled share option plan for no consideration - note
20(a)
(b) Net debt reconciliation
This table sets out the analysis of net debt movements during the periods.
2023 £ 2022 £
Cash and cash equivalents - note 9(c)
24,838,542
134,768,902
Borrowings - note 9(i)
(23,145,127)
(22,152,484)
Lease liabilities - note 10(b)
(2,967,905)
(1,336,487)
Net debt (1,274,490)
111,279,931
Cash and cash
equivalents £
Borrowings £ Lease
liabilities £
Total £
At 31 December 2021 (162,955,669) - (311,513) (163,267,182)
Financing cashflows 313,559,937 (21,573,387) 1,065,080
293,051,630
New leases - - (2,077,445)
(2,077,445)
Exchange differences (15,835,366) (545,885) (12,609)
(16,393,860)
Other charges
Interest expense - (460,399) (14,217)
(474,616)
Interest payments presented
as operating cashflows
- 427,187 14,217
441,404
At 31 December 2022 134,768,902 (22,152,484) (1,336,489) 111,279,931
Financing cashflows (104,264,838) 61,488 666,353
(103,536,997)
New leases - - (3,008,294)
(3,008,294)
Terminated leases - - 703,325
703,325
Exchange differences (5,665,522) (1,046,561) 7,198
(6,704,885)
Other charges
Interest expense - (885,719) (77,866)
(963,585)
Interest payments presented
as operating cashflows
- 878,149 77,866
956,015
At 31 December 2023 24,838,542 (23,145,127) (2,967,905) (1,274,490)
The table above does not include the Group’s digital asset holdings that do not form part of the
collateral/hedge work undertaken for CSDSL and XBTP. These assets represent liquid assets of the
Group as 31 December 2023 of £31,122,973 (2022: £2,251,032).
COINSHARES
2023 ANNUAL
REPORT
125 | 135
01
02
03
04
05
06
07
08
19. Related party transactions
The Group discloses transactions with related parties which are not wholly owned within the same
Group. Where appropriate, transactions of a similar nature are aggregated unless, in the opinion of the
directors, separate disclosure is necessary to understand the effect of the transactions on the Group
financial statements.
(a) Subsidiaries
Interests in subsidiaries are set out in note 15(a).
(b) Transactions with group directors
2023 £ 2022 £
Short-term employee benefits
316,474
2,484,350
Share-based payments
310,225
261,380
626,699 2,745,730
Mr Daniel Masters is the Group’s Chairman and a shareholder of the Group. During the year, the Group
undertook trades on his behalf of 13.91 BTC, 134.10 ETH, 42,773.29 AVT, 258,552.22 USDC, 24,918.07
XTZ and 20,070.60 XRP equating to £746,079. (2022: 31.27 BTC, 29.91 ETH, 22,153.12 AVT, 508,864.31
USDT and 2,000,000.00 USDC, equating to £3,110,834). As at the year end the Group held nil assets
(2022: 206,486.33 AVT (US$237,459, £196,237) and US$69,606 (£57,523)) owed to Mr Masters. The
Group also holds a receivable from Mr Masters and one other person jointly of US$37,183 (£29,826)
(2022: US$37,183 (£30,728)) in relation to an investment that was transferred using the Group as a
broker. Mr Masters also has a holding in CSF2LP. During the year, Mr Masters transferred US$122,000
of his holding to another Limited Partner. As at the end of the year, Mr Masters’s holding in CSF2LP is
valued at £5,588,734.
Mr Jean-Marie Mognetti is the Group’s Chief Executive Officer and a shareholder of the Group. During
the period the Group undertook trades on his behalf of £nil (2022: 30,000 AVT). As at the year end
the Group held a balance of 30,000 AVT (£17,909) (2022: 30,000 AVT (£28,511)) owed to Mr Mognetti.
Mr Mognetti is also a director of Tactiques D’Avant-Garde (Jersey) Limited (‘TAG’). During the year
the Group undertook trades on behalf of TAG of 6.50 BTC, equating to £150,546 (2022: £nil). As at 31
December 2023, £nil (2022: £nil) was outstanding from TAG to the Group.
Mr Richard Nash is a person discharging managerial responsibility and a shareholder of the Group.
During the year, the Group undertook trades on his behalf of £nil (2022: £nil). As at the year end, the
Group held 0.3 BTC (2022: 0.3 BTC) on his behalf.
Mr Johan Lundberg is a non-executive director of the Group. During the year the Group undertook
trades on his behalf of 75,000 USDC and 105,000 USDT, equating to £144,243 (2022: nil). As at the year
end the Group held nil assets (2022: nil) owed to Mr Lundberg.
(c) Transactions with other related parties
On 10 January 2022, CoinShares entered into a service agreement with FlowBank, an associate of the
Group. The arrangement ceased during 2022. £nil (2022: £18,000) has been charged during this year
of which £7,200 (2022: £7,200) remains outstanding at year end.
COINSHARES
2023 ANNUAL
REPORT
126 | 135
01
02
03
04
05
06
07
08
As part of a commercial relationship under which the Group facilitates trading activities for FlowBank
SA (‘Flowbank SA’) as a client, gains of £56,469 (2022: £58,529) were generated in respect of trading
related fees. This relationship ended in Q3 2023. Additionally, bank charges and FX trading commissions
of £14,711 (2022: £2,535) were paid to FlowBank SA in respect of banking services provided to
CoinShares as a client of FlowBank SA. As at year end the Group held a cash receivable balance of £nil
(2022: £1,123,191) and was holding assets on behalf of FlowBank SA with a value of £nil (2022: £273,312).
CSGP2L is the General Partner to CS2LP. The Group has recognised carried interest as at the year end
of £5,429,067 (2022: £5,279,885) which is held as an investment. The Group also settled expenditure
on behalf of CS2LP of £2,433 (2022: £7,019) of which £nil (2022: £1,477) is outstanding at the year end.
The Group has an investment in Komainu Holdings Limited (‘KHL’) of which Mr Jean-Marie Mognetti
is a director and shareholder. The Group has settled expenditure on behalf of KHL in the year of
£6,718 (2022: £19,727) of which £nil (2022: £9,967) remains outstanding at year end. The Group has a
recharge agreement with KHL which allows for use of office facilities. £132,000 (2022: £165,460) has
been charged for the year of which £11,000 (2022: £11,000) is outstanding at the year end. Previously
outstanding expenses of £9,907 have been written off as at the year end.
Komainu (Jersey) Limited (‘KJL’), a wholly owned subsidiary of KHL provides custodial services to the
Group. During the year, the Group paid fees to KJL of £792,885 (2022: £1,208,854) of which £119,051
(2022: £67,495) was outstanding at the year end. The Group also settled transactions on behalf of KJL
which has fees retained that are required to be returned to KJL. Fees of £10,804 have been returned,
of which £61 is outstanding at the year end. The Group has a service agreement with KJL which allows
for support regarding staking and operations. £5,000 (2002: £11,000) has been charged for the year.
The full amount invoiced of £16,000 has been written off at the year end leaving a balance of £nil (2022:
£11,000) outstanding at the year end. An additional amount has also been charged in relation to a staff
cost of £7,000 (2022: £nil) of which £7,000 (2022: £nil) is outstanding at year end.
GTSA is an associate of the Group. The Group has settled expenditure on behalf of GTSA in the year of
£248 (2022: £nil) of which £nil (2022: £nil) remains outstanding at year end.
3iQ Corp (‘3iQ’) is an investee company of the Group where Ms Meltem Demirors, an employee
of the Group, holds a board seat. During the year, the Group received a management fee rebate
from 3iQ of £453,552 (2022: £5,459,170) of which £nil (2022: £194,703) is receivable at the
year end. All 3iQ CoinShares Bitcoin certificates were redeemed by the Group during Q1 2023.
CSGP2L, a subsidiary of the Group, acts as General Partner of CS2LP. In this capacity, it receives quarterly
an amount of one quarter of two percent of the net asset value of CSF2LP. During the year £128,487
(2022 £97,041) has accrued for this fee, of which £32,029 (2022 £36,604) was outstanding at the year end.
On 10 January 2023 the Group agreed to enter into block transactions with two shareholders to acquire
196,654 ordinary shares in the capital of the Company, at a price per share equal to SEK 24 resulting in
total consideration of SEK 4,719,696 (£372,856). Of these, 75,000 shares were acquired from a person
discharging managerial responsibility, and 121,654 shares were acquired from an entity affiliated with
the Group. The transaction was completed on 13 January 2023.
On 28 February 2023 the Group agreed to enter into a block transaction with a shareholder (who is
also a person discharging managerial responsibility) to acquire 50,000 ordinary shares in the capital
of the Company, at a price per share equal to SEK 33 resulting in total consideration of SEK 1,650,000
(£130,984). The transaction was completed on 10 March 2023.
On 26 May 2023 the Group agreed to enter into a block transaction with a shareholder (who is also
a person discharging managerial responsibility) to acquire 358,783 ordinary shares in the capital of
the Company, at a price per share equal to SEK 30 resulting in total consideration of SEK 10,804,500
(£796,492). The transaction was completed on 14 June 2023.
--
COINSHARES
2023 ANNUAL
REPORT
127 | 135
01
02
03
04
05
06
07
08
20. Share-based payments
(a) Equity-settled share option plan
The establishment of the employee incentive share plan was approved by the board on 16 October
2020. The employee incentive share plan is designed to provide long-term incentives for employees
and managers to deliver long-term shareholder returns. Under the plan, participants are granted
options which only vest if certain performance criteria are met. Participation in the plan is at the
board’s discretion, and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
Performance based options:
The performance based options in issue by the Group vest when indicators of Group performance
meet criteria defined in the options certificate. External indicators include growing firmwide AUM,
increasing the number of ETP certificates in issue and the customer count. Internal metrics such as
measures of team performance are also used to track if the vesting criteria are being met.
The options have an exercisable period of 10 years from the vest date.
Time based options:
There are two separate options in issue. Some of the time based options in issue by the Group have a
vesting period of between 2-3 years from the issue date and expire 10 years from the date of the grant
of the option. Other options issued in March 2021 vest in 8 equal tranches, on a quarterly basis, over
a two year period.
(b) Share option liquidation scheme
Share options were repurchased from employees during the year under a scheme operated to allow
the voluntary early liquidation of share options. 10,446 (2022: 171,000) options were liquidated during
the period for a total consideration of £8,613 (2022: £207,544) (note 11(a)).
(c) Performance Based Options
Number of
share options
Weighted
average exercise
price £
Number of
share options
Weighted
average exercise
price £
Opening
1,773,600 1.43
1,944,600 1.43
Forfeited
(623,605) 1.43
- -
Liquidated
- -
(171,000) 1.43
Closing 1,149,995 1.43 1,773,600 1.43
Exercisable at closing 1,149,995 1,773,600
2023
2022
COINSHARES
2023 ANNUAL
REPORT
128 | 135
01
02
03
04
05
06
07
08
(d) Time Based Options
5,479 time based options (2022: nil options) were exercised during the year for an aggregate settlement
of £7,817.
448,000 time based share options were granted on 20 March 2023. The fair value of the options
granted is £656,821.
10,446 time based share options were liquidated during the period, for a total consideration of £8,613.
The options outstanding at 31 December 2023 had a weighted average exercise price of £2.63 (2022:
£4.33) and a weighted average remaining contractual life of 0.5 years (2022: 1.0 years).
Grant date Exercise price SEK Exercise price GBP
March 2023 31.00 2.44
The fair value of the options issued during the year at the grant date was calculated using the Black-
Scholes methodology. The method takes into account the exercise price, the term of the option, the
share price at the grant date, the expected volatility of the underlying share, the expected dividend
yield, the risk-free interest rate for the term of the option and the correlations and volatilities of peer
group companies.
The total share-based payment expenses for the year are £1,324,818 (2022: £1,229,617). All amounts are
equity settled and there are no liabilities in relation to share-based payment transactions outstanding
at the reporting date (2022: £nil).
Number of
share options
Weighted
average exercise
price £
Number of
share options
Weighted
average exercise
price £
Opening
2,202,857 4.33
1,546,977 1.43
Granted
448,000 1.68
690,402 6.73
Forfeited
(96,983) 1.83
(34,522) 6.35
Exercised
(5,479) 1.43
- -
Liquidated
(10,446) 1.43
- -
Closing 2,537,949 3.89 2,202,857 4.33
Exercisable at closing 1,129,445 160,552
2023
2022
COINSHARES
2023 ANNUAL
REPORT
129 | 135
01
02
03
04
05
06
07
08
Accounting policies
Equity-settled arrangements are measured at fair value at the date of the grant.
The fair value of share options under the employee incentive plan are estimated using the fair value
at the grant date. The fair value of share options is calculated using the Black-Scholes method. The
Strike Price was set at 31.00 based upon the value of the shares on the issue date, the risk free rate
selected was 3.25%. The vesting condition is 3 years and 70% of options are assumed to vest. At the
time of awarding these options, the Group did not have a dividend policy so this was not incorporated
into the valuation.
The fair value determined at grant date is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of the number of equity instruments that will eventually vest. At each
reporting date, the Group revises its estimate of the number of equity instruments expected to vest as
a result of the effect of non-market-based vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to reserves.
Where equity-settled arrangements are modified, and are of some benefit to the employee, the
incremental fair value is recognised over the period from the date of modification to date of vesting.
Where a modification is not beneficial to the employee there is no change to the charge for share-
based payments. Settlements and cancellations are treated as an acceleration of vesting and the
unvested amount is recognised immediately in profit and loss.
Arrangements are considered to be forfeited where the conditions of the grant are no longer deemed
to be met. This arises where an employee is no longer employed by the Group and where share options
are either not yet vested or have not been exercised before the date of them leaving the Group, or in
the case of performance options, where the conditions set out have not been met. Forfeitures are
treated as an acceleration of vesting and the unvested amount is recognised immediately in profit
and loss.
The Group operated a scheme to allow the voluntary early liquidation of share options. Liquidations
are treated as an acceleration of vesting and the unvested amount is recognised immediately in profit
and loss
The Group has no cash-settled share-based payment arrangements.
Key accounting estimate
Share based payment costs
The fair value of share options under the employee incentive plan are estimated using the fair value
at the grant date. The fair value of share options is calculated using the Black-Scholes method and
incorporates a number of key estimations and assumptions.
--
COINSHARES
2023 ANNUAL
REPORT
130 | 135
01
02
03
04
05
06
07
08
2023 £ 2022 £
Earnings
Earnings for the purposes of basic
earnings per share being net (loss)/profit
attributable to owners of the Company
(453,126,477)
520,216,064
Earnings for the purposes of diluted
earnings per share
(453,126,477)
520,216,064
2023 Number 2022 Number
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share
67,287,929
68,184,833
Weighted effect of dilutive potential
ordinary shares: Share options
3,977,029
3,955,200
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share
71,264,958
72,140,033
21. Earnings per share
As more fully disclosed in note 19, share options were issued during previous years, which have had a
dilutive effect. The Group made a loss in the prior year, therefore the share options are antidilutive and
have not been included in the calculation of diluted earnings per share.
The directors have also chosen to present the earnings per share calculated using total comprehensive
income in the place of loss after income tax expense. It is the opinion of the directors that this is more
representative of the Group’s financial performance due to the inclusion of the fair value gains on
digital assets recognised through other comprehensive income.
The calculation of the basic and diluted earnings per share is based on the following data:
2023 £ 2022 £
Basic earnings per share (6.74)
7.63
Diluted earnings per share (6.74)
7.21
COINSHARES
2023 ANNUAL
REPORT
131 | 135
01
02
03
04
05
06
07
08
22. Summary of other accounting policies
These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Fair value measurement
The Group measures financial instruments such as ETPs, and non-financial assets such as digital
assets, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either in the principal market for the asset or liability or, in the absence of a principal market, in the
most advantageous market for the asset or liability accessible by the Group.
The fair value hierarchy under IFRS is set out as follows:
Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the
Group can access at the measurement date.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable (i.e. developed using
market data) for the asset or liability, either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring
basis, the Group determines whether transfers have occurred between levels in the hierarchy
by re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
On a quarterly basis, the board of directors analyses the movements in the values of assets and
liabilities which are required to be remeasured or re-assessed as per the Group’s accounting policies.
2023 £ 2022 £
Adjusted earnings
Earnings for the purposes of basic earnings
per share being total comprehensive income
attributable to owners of the Company
38,396,035
2,934,267
Earnings for the purposes of diluted
earnings per share
38,396,035
2,934,267
2023 £ 2022 £
Adjusted basic earnings per share 0.57
0.04
Adjusted diluted earnings per share 0.54
0.04
The Group’s adjusted earnings per share, calculated using total comprehensive income, represents
the financial period’s contribution to distributable reserves of the Group.
COINSHARES
2023 ANNUAL
REPORT
132 | 135
01
02
03
04
05
06
07
08
Investment valuations are subject to several key judgements and reflect both local and external
economic factors. In selecting the investment valuation criteria, the directors evaluate the key drivers
relevant to each investment in conjunction with local partners, supported, wherever practicable, by
local market data. As such, fair value measurements for investment valuations have been classified as
Level 2 or Level 3 depending on the information available.
Level 1 and 2 valuations and inputs
The finance department performs monthly valuations of the Group’s investments that are classified
as Level 1 and 2 within the fair value hierarchy, utilising market data (investments in listed equities)
and observable inputs (CoinShares Fund II LP – carried interest and investments held at cost or
price of recent investment that may subsequently be reclassified to Level 3). Discussions of valuation
processes and results are held between the Chief Financial Officer, Audit and Risk Committee and the
Board once every quarter, in line with the Group’s reporting periods.
Level 3 valuations and inputs
The finance department performs quarterly valuations of the Group’s investments that are classified
as Level 3, within the fair value hierarchy, utilising a range of observable and unobservable inputs.
Discussions of valuation processes and results are held between the Chief Financial Officer, Audit and
Risk Committee and the Board once every quarter, in line with the Group’s reporting periods.
The main Level 3 inputs used by the Group are derived and evaluated as follows:
• price of recent investment;
• earnings multiples, estimated based on market information for similar types of companies;
• AUM multiples, estimated based on market information for similar types of companies; and
• percentage ownership of net asset value of the investee company.
Fair value policies and disclosures on specific balances are summarised in the following notes:
Digital assets Note 8
Investments Note 9
Financial instruments Note 9
For all other assets and liabilities measured at fair value, the directors perform an internal valuation
exercise to determine fair value using methodologies disclosed in the Group Investment Valuation
Policy.
(b) Foreign currency translation
Transactions and balances
Foreign currency transactions are translated into the functional currency of the relevant Group entity
using the exchange rates prevailing at the dates of the transactions.
At each reporting date, monetary assets and liabilities denominated in a foreign currency are translated
into the functional currency of the relevant Group entity at the closing exchange rate. Non-monetary
assets and liabilities denominated in a foreign currency, and measured at historical cost, are initially
translated into the functional currency of the relevant Group entity at the date of the transaction, and
are not subsequently re-translated. Non-monetary assets and liabilities denominated in a foreign
currency, and measured at fair value, are measured using the exchange rate at each date the fair value
is determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the
translation at period-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in profit and loss.
--
COINSHARES
2023 ANNUAL
REPORT
133 | 135
01
02
03
04
05
06
07
08
Foreign exchange gains and losses from the translation of assets and liabilities measured at fair value
are recognised as part of the fair value gain or loss.
Translation
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s
overseas subsidiaries are translated at exchange rates prevailing on the reporting date. Income and
expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the date of transactions are used.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in
a foreign currency translation reserve (attributed to non-controlling interests as appropriate).
On the disposal of an overseas subsidiary all of the exchange differences accumulated in a foreign
currency translation reserve in respect of that subsidiary attributable to the owners of the Group are
reclassified to profit or loss.
(c) Retirement benefits
The Group operates a defined contribution scheme for the benefit of its employees. Contributions
payable are charged to profit or loss in the year they are payable. The assets of the scheme are held
separately from those of the Group in an independently administered fund.
(d) Employee benefits
Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.
Short term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed
as the related service is provided. A liability is recognised for the amount expected to be paid if the
Group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
The Group may compensate employees for absence for various reasons including vacation, sickness
and parental leave. There is non-accumulating compensation of absence and this does not carry
forward; it will lapse if the current period’s entitlement is not used in full, therefore the Group does not
recognise a liability or expense until the time of absence.
Annual bonus plan
The Group operates a bonus plan for employees. An expense is recognised in profit and loss when
the Group has a legal or constructive obligation to make payments under the plan as a result of past
events and a reliable estimate of the obligation can be made.
(e) Adoption of new and revised Standards
New and amended IFRS Standards that are effective for the current year
The Company has applied the below amendments to IFRS Standards and Interpretations issued by
the IASB that are effective for annual periods beginning from 1 January 2023:
• IFRS 17 Insurance Contracts
• Definition of Accounting Estimates - amendments to IAS 8
• International Tax Reform - Pillar Two Model Rules - amendments to IAS 12
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction - amendments to
IAS 12
• Disclosure of Accounting Policies - amendments to IAS 1 and IFRS Practice Statement 2
--
COINSHARES
2023 ANNUAL
REPORT
134 | 135
01
02
03
04
05
06
07
08
The adoption of these amendments has not had any material impact on the disclosures or on the
amounts reported in these financial statements.
New and revised IFRS Standards in issue but not yet effective
Certain amendments to accounting standards have been published that are not mandatory for 31
December 2023 reporting periods and have not been early adopted by the group. These amendments
are not expected to have a material impact on the reported profit or loss, net assets, or total equity of
the Group in the current or future reporting periods and on foreseeable future transactions.
--
CONTACT
CoinShares International Limited
2nd Floor
2 Hill Street
St Helier
Jersey, JE2 4UA
Channel Islands
Website: coinshares.com
Email: enquiries@coinshares.com
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