The finance world may soon see Bitcoin ETFs on the ASX and in the US after a rule change.
Bitcoin is the biggest cryptocurrency, a currency that uses blockchain technology which tracks all transactions.
Bitcoin rule change
On Wednesday in the US, the Securities and Exchange Commission (SEC) approved a rule change to allow Bitcoin exchange-traded funds (ETF) in the US, according to various media reports, including CNBC.
People have been able to buy Bitcoin for years, but not as easily as with an ETF. In Australia, ETF provider Global X has a Bitcoin ETF currently available on CBOE, the second-largest stock exchange here in Australia. Some brokers (e.g. Commsec) can trade on both CBOE and ASX. In other words, it’s already possible to use an ETF to buy Bitcoin.
One of the attractions of an ETF structure is that many investors are already familiar with this type of investment, and it’s regulated.
The SEC hadn’t been welcoming of Bitcoin ETFs, but it has changed its mind. In August, the SEC lost to Grayscale – which claims to be the world’s largest crypto asset manager – in court because the SEC was allowing funds that track Bitcoin futures but not ones that allow investors to invest in ‘spot’ Bitcoin ETFs (which means investors can access the current Bitcoin price).
The SEC Chair Gary Gensler said:
Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.
According to CNBC, more than 10 different institutions are now in the process of moving toward a launch. The management fee could be one of the main differences between the offerings.
Some of the ones that could launch a fund include Blackrock, Grayscale, VanEck and Fidelity.
What about a Bitcoin ETF on the ASX?
According to reporting by the Australian Financial Review, the Australian Securities Exchange is set to approve an ETF linked to the price of Bitcoin in the first half of this year.
Monochrome Asset Management is reportedly the first in line to be approved by the ASX which applied in July. The market operator has set minimum requirements for crypto ETF custody and liquidity, while brokers will need to put up a margin of 40% ($0.40 per dollar) of daily fluctuations of the price to cover settlements.
BetaShares apparently also has plans to launch an ETF on the ASX.
According to Rask’s understanding, it’s believed the ASX would not have approved the Bitcoin ETFs currently already offered by its stock exchange rival, CBOE (which has listed the Global X Bitcoin ETF), when the ETF wanted to make them available.
An ASX spokesperson said:
The issuance of bitcoin ETFs by more issuers in Australia, following developments in the US, will not by itself lead to any change in the approach to setting margins for bitcoin ETFs or in the margin levels themselves.
In the case of ETFs whose underlying assets are direct holdings in cryptocurrencies [like] bitcoin, the margin levels are calibrated to reflect the price risk of the specific underlying cryptocurrency as this drives the ETF price risk, rather than the issuer of the ETF.
While investors can already access Bitcoin directly, or via ETFs on CBOE, it seems ASX-listed Bitcoin ETFs may not be far away…
