The Australian Securities Exchange (ASX) has introduced a Bitcoin exchange-traded fund (ETF), which is the first of its kind on the platform to be directly backed by Bitcoin.
ASX, which handles 90 per cent of Australia’s stock market activity, has listed the VanEck Bitcoin ETF (VBTC). It began trading with initial assets of around A$990,000 ($660,429).
The listing follows the recent approval by the US Securities and Exchange Commission (SEC) of the sale of spot ETFs in May.
The ETF operates as a feeder fund, meaning it doesn’t hold Bitcoin directly. Instead, it provides investors with exposure to Bitcoin by investing in the company’s Bitcoin Trust (HODL), which is a US.-based ETF. The Chicago Board Options Exchange (Cboe), an American exchange that trades various financial products, lists this Bitcoin Trust. By channelling investors’ money into this trust, the feeder fund enables investors to benefit from Bitcoin’s price movements without needing to buy and store Bitcoin themselves.
The introduction of a spot Bitcoin ETF on the ASX could provide more legitimacy to Bitcoin as an investment asset, potentially attracting more institutional and private investors who may have been hesitant to invest directly in cryptocurrencies.
The listing on the ASX also follows the recent approval by the US Securities and Exchange Commission (SEC) of the sale of spot ETFs in May.
Could this influence other global regulators to follow suit, aiding in the growth and acceptance of cryptocurrency markets?
Authorising investment funds
Dr. Alpay Soytürk, chief regulatory officer of Spectrum Markets, the pan-European trading venue, believes Europe will not follow suit anytime soon. Soytürk also adds that while the SEC has given initial approval for eight Ethereum ETFs, it has not yet completed all the necessary steps for them to start trading.
“Although these news testify the evolution and wider acceptance of crypto assets, it is unlikely we are going to see something similar in Europe soon. The reason lies behind the UCITS Directive, which contains diversification rules for the inclusion of indices as ETF underlyings, and virtually none of them allow for a disproportionate concentration risk on individual securities.
“This also calls for a reconsideration of how the protection provided by authorisation from a securities regulator should be evaluated. We do not intend to criticise the whole Bitcoin or Ethereum projects, but rather to question whether authorising investment funds in individual securities is a sensible measure.
“Of course, the ETFs now authorised offer the opportunity to gain exposure to bitcoin or Ethereum without having to hold the crypto assets directly. But firstly, there have been alternatives in this country before, such as securitised derivatives on BTC or ETH.
“Secondly, the ETF authorisation paves the way for large institutional institutions to become heavily involved in distribution, as the fierce fee competition among large US asset managers has already shown in the recent past. If this results in private investors with a rather conservative risk profile and investment objectives that do not correspond to this type of security becoming more involved and being unable to adequately compensate for strong downturns, securities regulators will be caught in the crossfire. ‘’
