Australia to consider issuing ETFs on Bitcoin and ETH

Australia may approve an ETF on Bitcoin. This is what emerges when reading a report dedicated to investment instruments in cryptocurrencies prepared by ASIC (Australian Securities & Investments Commission). 

The long text is a consultation paper that analyzes the pros and cons of the sector, in particular on ETPs and ETFs and was created precisely to then have comments and opinions so that the authority can arrive at a final decision. In its first lines it reads: 

“In Australia, we are aware of interest in, and demand for, domestic cryptoasset ETPs. However, we are also aware of the real risk of harm to consumers and markets if these products are not developed and operated properly”.

The key questions according to ASIC are: 

• whether crypto assets can be appropriate as underlyings for ETPs, whether they can be attributed to them, and whether crypto assets comply with current regulations;
• how those issuing these products can comply with the legislation by respecting parameters such as custody, risk management and disclosure. 

ASIC also writes that it is well aware of the scams plaguing the cryptocurrency world. However, it sees a growing demand from retail investors who want to enter the crypto market with products such as ETPs and ETFs that are fully regulated. 

Bitcoin and Ethereum ETFs could be approved in Australia

While the Australian regulator considers ETFs to be a sub-category of ETPs, the report goes on to outline the characteristics that ETPs must have and then makes it clear that not all cryptocurrencies can serve as underlying ETPs. In order to determine which ones may be suitable, crypto markets will be assessed, hence exchanges, trading volumes, fees, buyers and more.

At this point, ASIC claims: 

“At this point in time, in our view, the only crypto-assets that are likely to satisfy these factors are bitcoin (BTC) and ether (ETH)”.

So at the moment, there is only room for ETPs and therefore ETFs with only Bitcoin or Ethereum as underlying.

The report also analyses the characteristics that those who will act as custodians of cryptocurrencies must have. This is because, according to the authority, given the unique characteristics of cryptocurrencies, custodian entities are required to provide secure protection. They will be required to comply with KYC and AML regulations. 

However, the issuance of any ETPs or ETFs on Bitcoin and Ethereum will be agreed upon and adjusted with the government, verifying that the products meet all requirements. We will now have to wait for comments and feedback on this document. 

Then, perhaps Australia can follow Canada’s lead and issue its first ETPs and ETFs on Bitcoin and Ethereum. And who knows, maybe an approval in Australia will lead the US SEC to do the same.