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Australia’s Securities Regulator Approves the Launch of Crypto ETFs

Australia’s securities regulator has given the green light to investment firms seeking to launch ETFs with underlying cryptocurrencies to be able to do so.

Australian Securities and Investments Commission (ASIC) announced on Friday, October 29, that it had approved the use of cryptocurrencies as underlying assets for exchange-traded products (ETPs).

ASIC stated on Friday: “We recognize the interest in, and demand for, ETPs and other investment products that hold crypto-assets in Australia.”

After several months of engaging in consultations with market players seeking to launch their own crypto ETFs, the regulator made such a move.

New Guidelines for Crypto ETFs Trading

Besides that, the agency published a new guideline for providers looking to offer ETPs backed by the performance of crypto assets.

For cryptocurrency to be allowed to back an ETP or other structure product, it must meet five requirements: a mature spot, transparent and robust pricing mechanisms, a high-level institutional acceptance and support, experienced and reputable service providers to support the products, and regulated futures for trading derivatives, according the ASIC’s new guidelines.

Under the new guidelines, Bitcoin and Ethereum appear to have satisfied the regulator’s criteria as appropriate underlying assets for exchange-traded products (ETPs).

Another requirement states that investment firms will need to hire a custodial cryptocurrency expert to ensure cryptocurrencies are held in secure and safe custody.

The ASIC also requires fund managers to put a minimum of $10 million in net tangible assets to launch a crypto ETF. Fund managers are also expected to comply with other risk management, disclosure, and pricing obligations.

Despite such a series of new requirements, the agency stated that it will still take a case-by-case approach to license crypto assets for listing. So far, the regulator has approved only Bitcoin and Ethereum, although other cryptocurrencies are also expected to get listed on Australia’s stock exchanges soon.

“We proposed this because we recognize that crypto-assets vary greatly in their features, characteristics, risks and how they operate, and we consider that only some may be appropriate to be held by a registered managed investment scheme,” ASIC said.

ASIC Commissioner Cathie Armour talked about the development and stated that such new guidelines are necessary to mitigate the risks associated with such products.

“The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets,” Armour said.

Australia’s Crypto ETFs Debut

So far, ETF manager Betashare has become the first investment firm to launch a crypto-backed ETF on the Australian stock exchange, which is expected to start trading on Australia’s ASX stock exchange soon, possibly on Thursday this week.

Less than 24 hours after Betashare announced the launch of its Bitcoin ETF, Cosmos asset management firm also launched its crypto-backed ETF (Cosmos Global Digital Miners Access ETF), which is also scheduled to begin trading on ASX’s biggest rival Chi-X stock exchange.

The regulator stated that such crypto linked ETFs could be followed by products offering more direct exposure to crypto-assets in the coming months.

Holon Partners with Gemini, Launches Australia’s Lowest Fee Crypto ETFs

Holon, a digital asset venture capital firm and fund manager based in Australia, announced on Thursday that it has launched the first unlisted retail Bitcoin (BTC), Ether (ETH), and Filecoin (FIL) funds in Australia.

Holon said it has enabled such crypto offerings through a partnership with the Gemini crypto exchange.

According to the report, the funds will invest directly in Bitcoin, Ether, and Filecoin via a traditional investment vehicle known locally as a ‘retail managed investment scheme.’

Holon describes the investment products as Australia’s first unlisted retail Bitcoin, Ethereum, and Filecoin funds, providing local investors and advisors with low fees and regulated access to the growing blockchain and crypto landscapes.

According to Holon, the funds are so far the only retail-managed investment schemes for digital assets registered with ASIC (Australian Securities & Investments Commission).

In exchange for a share of interest, the crypto funds allow Australian investors to invest their money in managed investment schemes overseen by a fund manager.

Based on the partnership, Gemini would serve as the fund manager and provide custody services for all three funds. Gemini is a fiduciary and qualified custodian under New York Banking Law and licensed by the State of New York to the custody of digital assets.

Holon’s managing director, Heath Behncke, talked about the development and described the launch as a landmark for the Australian crypto market. He said: “We are huge believers in the potential for blockchain and cryptocurrency to revolutionise key areas of the global and Australian economy, including finance and data storage. But Australian investors, financial investors, and financial advisors have struggled to find regulated ways to invest.”

“The Holon funds have been carefully structured to include Gemini’s institutional grade custody to provide investors and financial advisors with attractive exposure to some of the most credible and exciting cryptocurrencies – Bitcoin, Ethereum and Filecoin,” Behncke further elaborated.

The funds have a $5000 minimum investment or $2000 with a $200 per month savings plan and provide access to daily redemption, daily unit pricing, and same-day cash settlement/asset purchase.

According to Holon, the funds hold long positions only, as there is no gearing or trading.

Holon said over time; it plans to have the funds offered via platforms that will enable financial advisers to allocate client investments like they do for any other portfolio investment.

Crypto ETFs Rising in Australia

The move by Holon to unveil its crypto funds in Australia follows other market participants that recently launched their crypto ETF offerings in the jurisdiction.

Investors in Australia started investing in Bitcoin exchange-traded funds (ETFs) in May this year after Cosmos Asset Management launched its Bitcoin ETF in the market. The ETF was listed on Australia’s Cboe platform and was the first physically-backed Bitcoin ETF in Australia.

Other market participants such as 21Shares and 3iQ also launched their BTC and Ether (ETH) spot ETFs in the region.

These came after the Australia Securities Exchange (ASX) Clear, the clearinghouse at the centre of Australian capital markets, approved the listing of crypto funds in November last year.

With such evolving developments, Australia joined the likes of Canada, Singapore, and Brazil as countries that offer a spot bitcoin ETF to investors.

Market Downturn Triggers Delisting of Crypto ETFs in Australia

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Cosmos Asset Management, a crypto fund manager based in Australia, has announced its intention to delist three of its cryptocurrency exchange-traded funds (ETFs) that trade on the Cboe stock exchange in Australia.

The North Sydney-based investment firm said on Wednesday it plans to delist the Cosmos Purpose Bitcoin Access ETF, Cosmos Purpose Ethereum Access ETF, and Cosmos Global Digital Miners Access ETF.

Cosmos management teams said they have applied to shut down the quotations of the three crypto ETFs on the exchange run by Cboe Australia.

Cosmos Asset Management was one of the firms that raced to unveil their first crypto ETFs in Australia earlier this year. However, the poor performance of these funds is evident, triggered by the onset of crypto winter that saw a significant decline in investors’ demand and a massive plunge of digital assets by as much as $2 trillion over roughly the past 12 months.

As per the company’s September disclosure, the Cosmos Purpose Bitcoin Access ETF had around $850,000 in assets under management, the Cosmos Purpose Ethereum Access ETF had about $232,000 and the Cosmos Global Digital Miners Access ETF had about $632,000.

In a statement on Wednesday, Dan Annan, Chief Executive at Cosmos, talked about the development: “While we strongly believe in the asset class, we are all disappointed with this result, however, we will continue to follow the process in the best interest of all unit holders.”

The funds kicked off with low volumes when they started their trading in May this year. The onset of the crypto winter in the ensuing months is identified to have damped investors’ appetite further.

Cosmos’ move follows an announcement by Digital asset fund manager Valkyrie Funds to close and delist its Valkyrie Balance Sheet Opportunities ETF (VBB), which offers exposure to Bitcoin.

Last month, Valkyrie liquidated the fund and subsequently delisted it from the Nasdaq Exchange. Blockchain.News reported the matter on October 12.

Valkyrie discontinued the investment vehicle due to the poor trading performance of the fund, terming the move as the best course of action for all involved.

Despite hitting its peak when launched in December last year, VBB stock tumbled with the crashing prices of crypto assets. VBB stock was down more than 54% this year, while Bitcoin price has dropped about 58%.

U.S. Senators Reed and Butler Urge SEC to Pause Crypto ETF Approvals Over Investor Risks

U.S. Senators Jack Reed and Laphonza Butler have taken a firm stance against the expansion of cryptocurrency exchange-traded funds (ETFs). The senators have expressed grave concerns over the “enormous risks” these financial products pose to retail investors, citing vulnerabilities to fraud and market manipulation. This move comes amidst a broader scrutiny of the crypto market by regulatory bodies.

In a shared statement, Senators Reed and Butler pointed to the nascent nature of cryptocurrency trading markets, which they believe are not yet equipped to handle the potentially destabilizing influx of investor capital that ETFs could channel into the sector. They argue that crypto markets are still largely unregulated and lack the transparency and oversight mechanisms that are commonplace in traditional financial markets.

The call for suspension of new crypto ETF approvals underscores a growing apprehension among lawmakers regarding the intersection of crypto assets and mainstream financial products. The senators have urged the Securities and Exchange Commission (SEC) to exercise caution before allowing further ETFs that track cryptocurrencies or related assets to come to market, emphasizing the need to protect investors from the inherent volatility and speculative nature of digital currencies.

Their appeal to the SEC to apply the brakes on crypto ETFs comes at a time when the commission has been taking a more proactive role in establishing a regulatory framework for cryptocurrencies. Recently, the SEC has pursued actions against several crypto firms and individuals for alleged violations of securities laws, and it has been vocal about the need for greater investor protection in the crypto space.

The senators’ call for action also echoes concerns from other parts of the government and financial industry experts who have been vocal about the potential for market manipulation in thinly traded crypto assets. The decentralized nature of cryptocurrencies and the absence of a central regulatory authority make it challenging to monitor and mitigate fraudulent activities effectively.

While the SEC has approved a few crypto-related ETFs, which primarily invest in companies with cryptocurrency exposure rather than direct ownership of digital assets, the commission has yet to approve an ETF that directly holds cryptocurrencies like Bitcoin. This cautious approach reflects the agency’s concerns about investor protection and market integrity.

The senators’ statement is a significant development in the ongoing debate over cryptocurrency regulation and its place within the broader financial system. As digital assets continue to gain popularity, the tension between innovation and regulation presents a complex challenge for policymakers and regulatory bodies like the SEC.

As the SEC considers the senators’ request, the future of crypto ETFs hangs in the balance. The outcome of this regulatory discourse will likely have profound implications for the cryptocurrency market and for the millions of retail investors looking to gain exposure to digital assets through conventional investment vehicles.