While the cryptocurrency industry continues to wait with bated breath for a spot-traded Bitcoin exchange-traded fund (ETF) to be approved in the U.S., three separate crypto funds were given the green light in Australia this week.
Australia’s ETFS Management (AUS) Ltd., or ETF Securities, launched a Bitcoin and an Ethereum fund, in partnership with Switzerland-based 21Shares AG. The two will track the price of each of these assets separately in Australian dollars when they go live on the country’s Cboe exchange on April 27.
“The appetite for [the ETFs] is simply huge,” said David Tuckwell, product specialist at ETF Securities. “We’ve never seen anything like it before.”
While Bitcoin-related ETFs have been approved in the country for some time — such as Cosmos Asset Management’s Global Digital Miners Access, which grants exposure to Bitcoin mining companies — these are the first spot-traded products to be available to Australian investors.
ETF Securities manages the fund as well as the actual cryptocurrencies while 21Shares provides operational and research assistance.
A third Bitcoin fund from Cosmos, which invests in crypto through the Purpose Bitcoin ETF listed in Toronto — the first Bitcoin fund in the world — will also go live on the same day.
An ETF is a financial product that tracks the price of an underlying asset as a share to be traded on stock markets, granting exposure to assets that investors may otherwise be unable to or unwilling to directly invest in.
This may be particularly true of crypto where many large institutional players may wish to have access to the market but are blocked for regulatory or internal reasons.
Another advantage for crypto ETFs is that of security, granting protection from the risks of lost wallets and passwords and from hacks on exchanges, which, while rare, do still happen.
Tuckwell expects the ETFs to be an AU$1 billion (about US$730 million) category by the end of the year, not only meeting the existing institutional demand but adding to it.
“A lot of people in the crypto industry have been so excited about it coming on board as an ETF,” he said, adding that this will have a positive impact on the underlying asset as well.
“It lends legitimacy to the asset class. If you can have a gold ETF or bonds ETF … why can’t you have crypto?”
It could also help legitimize the broader Australian crypto market as well.
“This will plant a flag in the ground for Asia; we know that other Asian governments are very much against Bitcoin,” Tuckwell said, referring to outright bans from China’s government, or at least cool attitudes such as in India. “If everywhere else in the region bans it, Australia’s the only place you can go then.”
See related article: SEC comes around on Bitcoin ETFs
Australia has made cryptocurrency a priority only recently; last month Treasurer Josh Frydenberg announced sweeping changes to the crypto industry aimed at increasing investor protection and introducing regulations for exchanges dealing in the asset class.
Many changes were based on a significant Senate report on the country’s fintech industry released late last year.
Coming from a land of plenty
Historically, the country has also had a progressive approach to these financial products; the first-ever ETF was a gold-based one launched in Australia in 2003 by Tuckwell’s father Graham Tuckwell at ETF Securities.
Despite this history and the fact other such products have already been well established in countries like Canada, it was still a long road to approval by regulators, with ETF Securities beginning the process all the way back in 2017.
It takes time to coordinate with all necessary parties — namely Australia’s Securities and Investment Commission — but Tuckwell explained the lengthy approval process and the huge investor demand are two sides of the same coin.
“If [regulators] get something wrong and launch something that no one cares about, it’s lower stakes,” he explained. “Whereas if you let something on to exchange, you build an ETF that a lot of people are interested in, you’ve got to make sure all your ducks are in a line,” he said.
The Cboe Exchange was chosen as the exchange of choice for these ETFs over the more well-known ASX, as ETF Securities thought it provided a faster route to market.
Several other Australian firms have Bitcoin funds in the approval pipeline, including VanEck Australia Pty Ltd., BetaShares Capital Ltd., and Monochrome Asset Management Pty. Ltd.