The possibility of Australia’s first fully accredited Bitcoin Exchange-Traded Fund (ETF) looms closer as an updated application for such a venture is lodged with the Australian Securities Exchange (ASX).
The innovative Bitcoin-focused investment management firm, Monochrome, in collaboration with Vasco Trustees, aims to break new ground, providing regulated exposure to Bitcoin for retail investors through the Monochrome Bitcoin ETF (IBTC).
The new horizon in Australian crypto industry
Monochrome’s step is the pioneering attempt at introducing a spot Bitcoin ETF on the ASX under a nearly two-year-old licensing system which includes cryptocurrency stipulations.
The partnership’s move also rides on the wave of Vasco’s financial license acquisition a year ago, allowing the operation of crypto spot ETFs in Australia.
Australia’s securities watchdog, the Australian Securities and Investments Commission (ASIC), revised its regulations for the Australian financial services (AFS) license in 2021.
The reforms aimed to foster market transparency amongst crypto enterprises and heighten investor safeguards. Key to these rules is the stipulation that institutional support and endorsement of the crypto in question must be in place for a spot ETF to be approved.
Additionally, “experienced” and “reputable” service providers must be willing to stand behind these products.
Meeting the challenges head-on
Given the stringent rules, only two AFS licensees, including the issuer behind the Monochrome’s ETF, currently hold any retail crypto-asset license authorization. The others are listed as wholesale, meaning they are not yet approved to extend such products to individual investors.
The past has seen failed attempts at introducing a Bitcoin ETF. Cosmos Asset Management’s Bitcoin ETF, which was set up as a fund of funds, offering exposure to a Canadian spot Bitcoin ETF, sought to claim the title of the country’s first Bitcoin ETF.
Despite these ambitions, lack of interest led to its delisting in November of the previous year.
Monochrome’s proposed Bitcoin ETF stands out in the Australian crypto landscape. According to Jeff Yew, CEO of Monochrome, the key differentiator for their ETF lies in its authorization under the ‘crypto-asset’ licensing category.
This allows the fund to hold Bitcoin directly at the fund level, presenting a stark contrast to other fund structures in the market.
Addressing the disappointing performance of Australia’s past spot Bitcoin ETFs, Yew attributes Cosmos’ delisting to unfavorable market timing and misunderstandings around the fund’s licensing and operational issues, leading to inconsistencies between the unit price and Bitcoin.
The interest in spot Bitcoin ETFs is not unique to Australia, as major US institutions such as BlackRock, Invesco, and WisdomTree have all recently filed.
According to ASIC’s updated guidelines, an investment vehicle must demonstrate substantial “institutional support and acceptance of the crypto asset” for approval. A “mature spot market” and a “regulated futures market” for trading derivatives linked to the crypto asset are also required.
Yew asserts that the potential launch of a Bitcoin ETF on the ASX would signify the end of the “unregulated Wild West” era to traditional investors.
He maintains that the new investment vehicle would offer a “familiar,” “structured,” and “protected environment” to investors, ushering in a new phase for the Australian crypto industry.
