Those seeking to create bitcoin-backed exchange-traded funds welcomed ASIC’s consultation.
“In our view, this is a forward step in legitimising digital assets as a mainstream asset class and we believe that the ETF vehicle is by far the most superior investment vehicle,” said Arian Neiron, managing director of VanEck in the Asia Pacific.
VanEck and BetaShares have each lodged submissions with the ASX in a race to list a cryptocurrency-backed exchange-traded fund.
Retail investors can already get access to crypto assets via decentralised exchanges such as Uniswap or Sushiswap and decentralised applications, which are not licensed by ASIC or operating under any regulator oversight.
The consideration of appropriate rules for bitcoin and other crypto products comes after ASIC in February was forced to reject industry speculation it is opposed to such products. Much of ASIC’s focus around crypto has been on consumer scams.
Interest in bitcoin surged in December and the new year, as its price surged to new highs on the back of more institutional interest in the asset as a commodity that could hedge against the impact of inflation. However, in the past few months, crypto currency prices have fallen heavily and remain highly volatile.
ASX, which has adopted a cautious approach to crypto listings, has been waiting for this ASIC consultation process before making a decision on whether to approve ETFs linked to bitcoin to come onto the exchange.
Cosmos Capital had an application to list an ETF linked to the bitcoin price on the National Stock Exchange of Australia blocked by ASIC last last year, which ASIC said was due to NSX not having appropriate rules to protect investors.
ASIC said the way in which crypto-assets themselves are classified and regulated is a matter for government. The Senate Select Committee on Australia as a Technology and Financial Centre is currently considering this issue and due to report in October.
ASIC said it was important to develop “robust and transparent pricing mechanism” for crypto ETFs and said ‘responsible entities’ needed to think about their duties.
Lawyers say there is confusion in the market about what crypto currency tokens should be considered securities. The United Kingdom has issued detailed guidance on the classification of the new assets.
ASIC commissioner Cathie Armour said ASIC’s proposals “set out good practices” for market operators and issuers, who “need to be mindful of meeting their existing regulatory obligations when creating, operating and allowing such products, so they can be facilitated in a way that maintains investor protections and Australia’s fair, orderly and transparent markets”.
A wide consultation is necessary given “given the unique, evolving characteristics and risks involved with crypto-assets” and ASIC has asked for submissions by July 27.
- ASIC’s Cathie Armour will appear at The Australia Financial Review’s Cryptocurrency Summit on July 21.