Australian regulators seek public input on crypto ETPs

Published at: June 30, 2021

The Australia Securities and Investments Commission (ASIC) is seeking public feedback on on crypto-asset exchange-traded products (ETPs), stating that it is aware of rising interest and demand in their launch on regulated Australian markets.

In a consultation paper released June 30, the regulator said its top priority was to assess whether the “unique and ever evolving features” of crypto-asset ETPs could meet existing regulatory obligations in a consistent fashion. Given this complexity and the fast pace of change in the industry, ASIC notes it deems it necessary to consult widely in order to assess the two key issues at stake:

“(a) whether these products can meet existing expectations for ETPs, including whether crypto-assets are appropriate underlying assets, whether crypto-assets can be reliably priced, and how crypto-assets should be classified with respect to underlying asset rules; and (b) how product issuers can ensure these products are compliant with our regulatory framework, including with respect to custody, risk management and disclosure.”

ASIC's paper indicates that the regulator does not consider that all crypto assets are currently able to serve as appropriate underlying assets for an ETP, taking into account its assessment of the maturity of the industry's spot and the level of regulation of its futures market. However, the regulator is open to approving a crypto asset ETP that could meet all its relevant assessment criteria. Here, the regulator notes:

"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)."

ASIC's initiative appears to have been galvanized both by the recent listing of an Ethereum ETP on the Toronto Stock Exchange — something that ASIC explicitly notes in its paper — and ongoing considerations by the Australian Securities Exchange (ASX) of several crypto ETP applications.

In recent months, ASIC has become increasingly proactive in reaching out to domestic blockchain and crypto firms and has been attempting to build trust and collaborate with the crypto economy. The regulator has, however, received criticism from some of these firms for the perceived opacity of existing regulations and crypto companies' compliance obligations.

In its statement, ASIC stresses that the way in which crypto assets themselves are classified and regulated in Australia is a question for the government. The Senate Select Committee on Australia has been assessing options for the development of a comprehensive regulatory framework for crypto and digital assets, and ASIC emphasizes that its paper does “not seek to pre-determine any decision the Committee may make.”

Feedback from the public will need to be submitted to ASIC by July 27. Respondents can choose to submit their responses openly, anonymously or using an alias.

Speaking with Cointelegraph, BetaShares founder and CEO Alex Vynokur addressed ASIC's consultation question as to whether it would be appropriate to offer retail investors exposure to crypto assets underlying ETPs through a licensed Australian market. Vynokur said that BetaShares, as a local provider of ETP's and other ASX-traded funds, holds the view that this approach would offer consumers better protection than direct access through exchanges.

Vynokur also agreed with the proposal that regulated investment products like ETPs should be limited to a “small subset of crypto-assets, that can demonstrate robust liquidity, transparency and price discovery.”