Australia's financial regulator gives the green light to a number of cryptocurrency-related ETFs. Bitcoin ETF shares may appear on ASX soon.
On Friday, the Australian Securities and Investment Commission (ASIC) released a set of guidelines and requirements for crypto exchange traded products, or ETPs. The publication of new guidelines was preceded by a series of consultations that the regulator had been conducting since June.
The new guidelines will allow funds to launch exchange-traded funds (ETFs) that invest directly in cryptocurrencies or in related assets such as mining companies and crypto exchanges.
Investment firms interested in setting up a bitcoin ETF will have to adhere to strict rules. First of all, they will concern the storage of cryptoassets. Thus, the storage of private keys should be carried out in a "cold" storage not connected to the Internet, and "reliable methods of physical security" are provided for crypto wallets. Many backups will need to be created and stored in geographically dispersed locations. Also, funds will have to think over a mechanism for compensating investors in case of loss or theft of cryptoassets.
Funds will also have to apply for an extended financial services license, which specifically permits the storage of cryptoassets.
Katie Armor, a commissioner at ASIC, noted that cryptocurrencies have special risks that must be considered by issuers of financial products and market operators.
“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.”
The ASIC guidelines also place a share of responsibility on market operators, such as the Australian ASX exchange, who will have to assess which cryptocurrencies are acceptable for ETFs. This assessment includes if there is a high level of institutional support for the asset and if there’s a number of reputable service providers for the asset, a mature spot market, a regulated futures market and transparent pricing mechanisms. An ASX spokesman said it is already working with issuers interested in launching crypto ETPs.