• Australia: The Australian Securities and Investment Commission (ASIC) has issued new ETF guidelines to protect investors

  • The launch of the first Bitcoin Futures ETF in the United States has reignited the debate over the safety of cryptocurrency-backed investment products. Many other countries are wrestling with the details of approving investment products backed by unregulated and volatile digital assets. One of them happens to be Australia.

    Earlier today, the country’s corporate financial watchdog issued a new set of guidelines. Its goal is to protect investors and increase transparency. This comes just a week after a senate committee report urging the country to enact new digital asset laws, which would increase Australia’s stake in the global crypto competition.

    The Australian Securities and Investment Commission (ASIC) issued guidelines aimed primarily at how product issuers and market participants can become more regulatory compliant in relation to crypto-asset ETPs. Those who hold the underlying assets in a crypto-ETP, for example, will need to obtain a license. The ASIC has added a new “crypto-asset” section to the licensing applications for such holders.

    In essence, the watchdog has given the go-ahead for the creation of cryptocurrency-backed funds for retail investors. Only products linked to Bitcoin and Ether, however, will be eligible for approval. This is because the watchdog insisted on including only crypto assets with transparent pricing mechanisms, institutional backing, and a relevant futures market, leaving only the top two cryptocurrencies as considerations.

    The guidance also included best practices for market participants. This emphasizes how investment products must be admitted and supervised by market participants, as well as how product issuers must establish and operate them.

    The agency’s guidance covered key areas such as disclosure, risk management, pricing methodologies, custody of crypto-assets, and admission and monitoring standards.

    Cathie Armour, Commissioner of ASIC, stated,

    “In Australia, we recognize the interest in and demand for ETPs and other investment products that hold crypto-assets… Crypto-assets have unique characteristics and risks that product issuers and market participants must consider in order to meet their existing regulatory obligations.”

    Back in July, the ASIC warned that a Bitcoin ETP could be risky, and that the country should proceed with caution if it wants to create its own crypto-backed investment products. It had also solicited feedback from market participants on the matter.

    This was in response to reports that the country’s Securities Exchange (ASX) was considering launching Australia’s first crypto-ETF by the end of the year and was evaluating a number of ETF applications for this purpose.

    The new guidelines are expected to resurrect efforts by fund managers in the country to launch a crypto-backed ETF, including BetaShares, VanEck, and Cosmos Asset Management, which currently have products in the works. In any case, two ETFs with crypto exposure were listed on the Chi-X this month, and another is set to begin trading on the ASX in November.

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