Australian regulator lays out rules for crypto ETFs

The Australian Securities and Investments Commission (ASIC) has published a set of requirements for admission to trading on stock exchanges for crypto-based ETP products, including managed funds, ETFs and structured products.

That was preceded by months of consultation with industry participants, which began in June. At that time, the regulator allowed listings of crypto-ETFs on ASX provided that adequate safeguards were in place.

To gain approval for digital assets, they must secure a high level of institutional backing, mature spot and regulated futures markets, trusted service providers, and transparent pricing mechanisms.

In assessing the maturity of the spot market, ASIC considers assets against the following criteria:

• the number of core platforms on which they have been listed;
• trading volume and frequency across platforms;
• fee levels and bid-ask spread;
• structure of market participants;
• share of trading activity on regulated platforms;
• efficiency of arbitrage between major platforms and the pricing consistency across them.

As of October 2021, Bitcoin and Ethereum met these criteria. The regulator emphasised that new assets may be added to this list.

For each application to launch an ETF, licensed exchanges must assess whether the issuer can provide safe and reliable custody, and obtain the necessary licenses. ASIC sanctioned the use of foreign custodians to sustain competition.

As noted, in July ASX warned about the risks of storing digital assets in accounts on centralized trading venues. By the end of October, the Senate committee examining cryptocurrency regulation will unveil policy recommendations, said Senator Andrew Bragg of New South Wales.

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