Australian securities regulator issues guidelines for crypto ETPs

Published at: Oct. 29, 2021

The Australia Securities and Investments Commission (ASIC) has issued its response to public consultation on cryptocurrency exchange-traded products (ETPs) alongside fresh industry guidance.

On Oct. 29, the regulator released a set of regulatory requirements for funds looking to offer crypto ETPs, including exchange-traded funds (ETFs) and structured products, following months of industry consultation initiated in late June.

According to the official guidance, ASIC has so far greenlighted ETPs based on major cryptocurrencies like Bitcoin (BTC) and Ether (ETH) and expects more crypto assets to become a foundation for ETPs in the future:

“As at October 2021, Bitcoin and Ether appear likely to satisfy all five factors identified above to determine appropriate underlying assets for an ETP. We expect the range of non-financial product crypto-assets that can satisfy these factors will expand over time.”

In order to become a proper basis for a crypto ETF, crypto assets should obtain a high level of institutional support, a mature spot market, a regulated futures market, reputable and experienced service providers and transparent pricing mechanisms, the guidance reads.

For each crypto ETF product application, licensed exchanges have to assess whether the issuer is able to fulfill its obligations in relation to the product, including providing safe and secure custody as well as obtaining relevant licenses.

In a response to public consultation, the ASIC also said that it doesn’t require domestic crypto custody for entities issuing crypto ETFs, noting that such restrictions would unfairly limit competition.

“While we acknowledge concerns raised by respondents about overseas-based custody of crypto assets such as the potential for difficulties in recovering assets across jurisdictions, we consider it would be inappropriate to mandate a domestic custodian requirement,” the document reads.

The news comes shortly after Australian hedge fund manager Cosmos Asset Management debuted its crypto mining-linked ETF on Chi-X Australia on Oct. 28. The Cosmos Global Digital Miners Access ETF began trading under the ticker DIGA and tracks several firms like Riot Blockchain, Marathon Digital, Hive Blockchain Technologies, Hut 8 Mining and others.

Australian ETF provider BetaShares is also preparing to launch a crypto ETF linked to industry companies like Coinbase and MicroStrategy. The crypto ETF will reportedly start trading on the Australian Securities Exchange under the ticker CRYP next week.