Australian Securities Regulator Issues Crypto ETF Guidelines

ASIC shows openness by issuing a guideline for crypto ETPs and acknowledging regulatory limitations.

Forward-Looking Approach 

The Australian Securities and Investment Commission (ASIC) issued a report following public consultation on crypto-assets as underlying assets for an Exchange Traded Product (ETP). The report included a fresh set of guidelines that focuses on five identifying features.

The five identifying features that the report has listed are a high level of institutional support, a mature spot market, a regulated futures market, reputable and experienced service providers, and transparent pricing mechanisms. These features will be the pillars that support a fair, orderly, and transparent market in an ETP. 

The report also dealt with other stakeholders’ concerns relating to custodial services. There are suggestions to mandate domestic custody of crypto assets within the Australian regulatory framework, but this suggestion was rejected.  

‘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…’- ASIC responded in their report. 

The regulators Down Under have taken a commendable approach by being transparent on criteria that qualify any crypto asset as an underlying asset and addressing citizens’ concerns. The open approach is not one shared by all countries in the West.

Source: Exchange Traded Fund (ETF) is a form of Exchange Traded Product (ETP) that will provide a new influx of funds into the crypto ecosystem

Consultation Paper

The authorities must recognize that a robust regulatory framework must be inclusive. The industry players’ concerns and proposals ought to be given due weight by the regulators. ASIC has set a good precedent for regulators worldwide by adopting a transparent and accountable approach in regulating the crypto industry. 

ASIC received 42 submissions from various stakeholders, 10 of which are confidential. The list of non-confidential submissions and their contents are available here. ASIC went one step further by responding to the broad issues raised in these submissions. This is regulatory accountability that is commendable.

Stakeholders are seeing this approach as a positive stance. This report is timely as the first local ETF is set to be approved in favor of Australian Fund Manager, BetaShares November 4th. ETF Research Analyst James Seyffart took to Twitter to applaud ASIC’s decision to approve a spot Bitcoin ETF. Unlike Australia, the ETFs approved in the US are futures Bitcoin ETFs, where the US Securities and Exchange Commission (SEC) is still uncertain on the fate of spot Bitcoin ETFs. 

Source: Providing an investment platform for crypto exposure through ETF is a regulatory safeguard to investors

In contrary to Australia, the US SEC is stifling growth in its domestic crypto market by constantly repeating the need for investors’ protection without actually addressing the need. Investor protection can be better safeguarded through an established framework of compliance. An ETF is an existing regulatory framework that is tried and tested. The only difference lies in the underlying asset. Various jurisdictions have successfully launched spot Bitcoin ETF without compromising investors’ interest, and America would not be any different

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