Approve Bitcoin ETFs to protect investors
The regulator would be wise to approve cryptocurrency exchange traded funds (ETFs) as it would prevent investors from accessing riskier, unprotected options, according to an asset manager.
Last month, the Australian Securities and Investments Commission (ASIC) released a consultation giving approval to the launch of cryptocurrency products and it indicated Australia could see a Bitcoin ETF before the US.
There had been multiple applications made to the US’ Securities and Exchange Commission but none had been approved yet.
Speaking to Money Management, Jeff Yew, founder of Monochrome, said there had been a surge in interest by retail investors in cryptocurrency. With this in mind, it would be a good idea for the regulator to approve exchange traded funds (ETFs) to prevent them accessing riskier options.
Since the ASIC consultation, BetaShares and VanEck had both announced plans for a Bitcoin ETF while Commonwealth Bank of Australia had announced it would offer crypto to retail investors.
Yew said: “The interest in cryptocurrency is high so the longer the regulator delays it, the more people will look to access it in other ways. People are coming into the space so they need something which is regulated and offers investor protections. Without that on offer, there is a risk they explore riskier structures which are ungoverned”.
There were three options for exchange traded funds, he said, those which offered indirect exposure such as BetaShares Crypto Innovators ETF, those which traded futures and those which were spot-based crypto, which was the option pushed by VanEck.
“A spot-based ETF is the market’s preferred route and has cheaper operating costs than a futures one. It also has more security but there are regulatory hurdles at the moment so they are taking longer to come to market,” he said.
Meanwhile, Yew said he was disappointed that the Commonwealth Bank of Australia (CBA) opted to work with US crypto exchange Gemini rather than an Australian-based firm.
“The move by CBA is remarkable and very exciting, it will be a convenient way for retail investors to access crypto.
“It’s unfortunate they didn’t pick a local business as there are many players in Australia that they could have worked with, or at least discussed options with, before they went overseas.”
AUTHOR
Laura Dew
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
