Australia’s securities regulator has issued new recommendations, and things seem to be looking up for Bitcoin and Ethereum exchange-traded products (ETPs).
The Australian Securities and Investments Commission (ASIC) has taken cautious but measured action in relation to an exchange-traded product (ETP) that tracks the performance of bitcoin or another cryptocurrency.
The organization recently released advice outlining the regulatory criteria for funds awaiting approval to provide crypto ETPs, which include exchange-traded funds (ETFs) and structured products. The guideline is intended to safeguard investors while providing increasing openness.
According to the released document, every cryptocurrency must fulfill five requirements in order to be considered a legal asset for the backing of an ETP or other structured product. These include the following:
Institutional backing and acceptance are strong, and the fund is actively utilized for investment objectives. Availability of credible and experienced service providers such as custodians, fund administrators, market makers, and index providers that are willing to assist ETPs that invest in or give exposure to crypto-assets. Existence of a developed spot market. Existence of a regulated futures market for trading derivatives on the crypto-asset,
Price mechanisms should be strong and transparent throughout the trading day for the asset and should arrive at a NAV price.
According to ASIC, these elements are used to promote a ‘fair, orderly, and transparent market’ by ensuring that only digital assets meeting these requirements are supported inside the ETP framework. By doing so, the regulatory body wants to reduce the likelihood of pricing manipulation problems.
Additionally, ASIC verified that the two major cryptocurrencies – Bitcoin and Ethereum – meet the criteria outlined above. While it has approved the establishment of cryptocurrency-backed funds targeted at retail investors, products tied to BTC and ETH will be the only ones eligible for approval for the moment. However, ASIC anticipates the eventual inclusion of other assets in ETPs.
As a consequence, a number of nations are now debating the feasibility of allowing such investment products backed by unregulated and unpredictable digital assets. Australia has had a similar predicament.
The announcement comes less than a week after an Australian Senate Committee suggested a more transparent, robust, and user-friendly regulatory framework for the country’s booming crypto sector.