The first exchange-traded funds (ETF) to offer exposure to the crypto market in Australia are scheduled to make their debut next week according to a report from the Australian Financial Review.
The report stated that regulators have already given the green light to Cosmos Asset Management to launch what would be the first vehicle to offer exposure to Bitcoin (BTC) while another local contestant – ETF Securities – has already announced that it will be making available two ETFs – one tracking BTC and another one for Ethereum (ETH).
The ETFs offered by ETF Securities in collaboration with 21Shares will go live on 27 April and they will allow Australians to get exposure to the two most popular crypto assets via the Australian Securities Exchange (ASX).
The BTC vehicle will be listed under the ticker symbol EBTC and it will track the value of the digital asset in Australian dollars while the ETH vehicle will be listed under the ticker symbol EETH.
The digital assets owned by the two vehicles will be held in cold storage by one of the world’s largest cryptocurrency exchanges – Coinbase.
The ETF offered by Cosmos will hold BTC via the Canadian-listed Purpose Bitcoin ETF. Some reports indicate that these vehicles could attract up to $1 billion in inflows from both individual and institutional investors within the country. Purpose’s Bitcoin ETF currently charges a 1% annual management fee.
What are ETFs and Why is this Listing Important?
Exchange-traded funds (ETF) are vehicles that trade like a stock and their purpose is to provide exposure to certain types of financial instruments. In the case of crypto ETFs, they facilitate the task of incorporating these digital assets into an investment portfolio.
For most lay investors, having to open accounts at multiple brokerage firms for buying and selling crypto is a bit inconvenient and that is an important barrier of entry for the adoption of cryptocurrencies as a more mainstream asset class.
With this in mind, the launch of ETFs is making cryptos more accessible to the investing public as digital assets can now be easily incorporated into retirement and regular taxable accounts. Moreover, corporations can also diversify the composition of their liquid reserves by buying these ETFs and the same goes for investment funds.
The Debate Concerning How Cryptos Should Be Regulated Continues
In Australia, the regulatory framework for cryptocurrencies is still a topic of heated discussion as the Australian Securities and Investments Commission (ASIC) – the country’s top financial watchdog – has asked for further authority to oversee the space.
Cryptocurrencies are not yet recognized as money in the country but they are considered property. This makes it difficult for regulators to impose limitations on how these assets are exchanged and offered to the public.
According to statistics from the Australian Taxation Office, around 800,000 residents of the country have invested or transacted with these digital assets in the past three years.
The government has made several proposals to regulate the industry’s functioning including the issuance of licenses for companies that provide broker-dealer services, some minimum standards that mitigate risks for consumers, and rules concerning the advertising and promotion of investments.
Recently, ASIC enforced its rules concerning the offering of financial products and services (including cryptos) by social media influencers. The rules were applicable to companies that hire these individuals for the purpose of promoting these products as well.
Breaking these rules could lead to millions of dollars in penalties, especially if influencers do not disclose the risks involved when investing in these products and/or if they intentionally or unintentionally make misleading statements about their performance and prospects.
Crypto assets are highly volatile unregulated assets. Your capital is at risk.