Australian regulator publishes guidance on launching cryptocurrency ETPs and ETFs

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The Australian Securities and Investment Commission has published regulatory requirements for the launch of ETPs and ETFs tied to cryptocurrencies.

In June, Australia’s stock market regulator began public consultations on the launch of cryptocurrency exchange-traded funds (ETFs) and exchange-traded products (ETPs). Months later, Australian Securities and Investment Commission (ASIC)
presented recommendations for launching these investment instruments.

The ASIC guidance states that cryptoassets to which ETFs and ETPs will be pegged should receive a high level of support among institutional investors. In addition, these cryptocurrencies must be sufficiently mature in the spot cryptocurrency market, be present in a regulated futures market, be used by reputable virtual asset service providers, and have transparent pricing mechanisms.

“As of October 2021, Bitcoin and Ether are likely to meet the specified characteristics of the underlying assets, which should form the basis of the ETP. We believe that the range of crypto assets that can meet these requirements will expand over time, ”said ASIC.

Upon receiving an application to place a cryptocurrency ETF, licensed exchanges are required to assess whether the creator of that ETF will be able to meet its product commitments and ensure that funds are held securely. You also need to check if it has all the required licenses. At the same time, ASIC noted that companies launching cryptocurrency ETFs do not need to provide custody services only domestically, since such restrictions would be unfair and would limit competition.

“We understand the concerns of the participants in the discussion about the difficulties that may arise when storing crypto assets abroad and returning them. However, we consider it inappropriate to introduce requirements for the storage of cryptocurrencies only within the country, ”the department noted.

Australian company BetaShares already
preparing to the launch of an ETF that tracks shares of cryptocurrency exchange Coinbase, mining company Riot Blockchain, and Bitcoin investing company MicroStrategy. This ETF is expected to be listed on the Australian Stock Exchange (ASX). The ASX is already reviewing several crypto ETF launch applications from various companies, but has yet to confirm the possibility of placing them.

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