Australian watchdog paves way for digital currency ETFs with new guidelines

Australia could soon be seeing digital currency exchange-traded funds (ETFs), following in the steps of Canada and, most recently, the United States. This is after the country’s securities regulator issued new guidelines for the industry, outlining the licensing requirements for companies seeking to offer ETFs, engage in token sales, facilitate trading, and more.

The Australian Securities and Investment Commission (ASIC) announced the new “guidance on crypto-asset related investment products” last week. The regulator’s goal with the new guidance is to cover good practices for product issuers in how they establish and operate related products, it stated.

One of the biggest takeaways from the comprehensive set of guidelines is that the ASIC is open to a digital currency ETF. The ASIC will allow market players to offer ETFs that invest directly in digital currencies and other adjacent assets such as miners or exchanges. 

The approval comes at a time when the U.S. has grabbed global headlines after approving the first ETF, which started trading on October 19 followed by a second ETF three days later. This was after the SEC had been adamant against a digital currency ETF, with Jay Clayton rejecting several applications during his tenure as the SEC chief.

In Australia, several firms have expressed interest in launching a digital currency ETF. One of these, $20 billion ETF provider Betashares, recently revealed that once the regulator gives the green light, it would begin to work on its ETF. Claiming that Australia has over a million digital currency owners, CEO Alex Vynokur stated that this would provide a great market for the ETF.

The ASIC will hold ETF issuers to a high set of standards, it stated. It will mainly be stringent on custody, requiring all the issuers to store their assets in cold storage. All wallets which they use must also be subject to robust physical security practices. Even with all these measures in place, the ETF issuers must have a compensation plan just in case the assets are stolen.

Cathie Armour, an ASIC Commissioner commented, “Crypto assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations. The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets.”

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