Bitcoin and Ethereum holders were bolstered after the long awaited approval of spot exchange-traded funds (ETFs) for Bitcoin and Ethereum. As well as approval from the Australian Securities and Investment Commission (ASIC) a set of best practice guidance has been issued.
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The announcement has been warmly welcomed by Australian investors as it provides exposure to the physical assets’ price through trading on the Australian Securities Exchange (AXA). It also provides a boost to cryptocurrency credibility although the announcement only allows the top two cryptocurrencies in the world, Bitcoin and Ethereum to be spot ETF traded.
Other commentators have stated that this is a major step towards Australia achieving its future digital goals.
ASIC’s Regulatory Guidelines
As well as allowing Bitcoin and Ethereum ETFs, Australia’s regulatory body published best practice guidelines.
This includes:
- Bitcoin and Ethereum ETF issuers have to use private keys and offline cold storage to store crypto assets. The regulator used the phrase “robust physical security practices”.
- Issues must hold £10 million Australian dollars in net tangible assets.
- Pricing, disclosure and risk management literature must be freely available to investors.
ASIC stated they recognise there is a strong demand for crypto assets and it was important that they were correctly managed to reduce the risk of harm to consumers.
Effects of Spot ETFs in Relation to Futures ETFs
Futures ETFs was approved several weeks ago by ASIC. This was not met with excitement from crypto purists who argue the nature of it is not suitable for Bitcoin. The main drive of the argument against using Bitcoin in future is that by nature they require two parties to agree on a predetermined date and price. As such, one party can pay more or less for Bitcoin’s current spot market price.
This is probably why the best futures trading brokers are in demand especially in relation to Bitcoin futures ETF.
Meanwhile, given the stellar launch of Crypto Innovators ETF (CRYPAX) it is believed that crypto holdings are going to be bolstered among the investment community. CRYPAX received in the first hour of trade the highest inflows of any ETF in ASX history.
Other good news for crypto enthusiasts comes in the form of the Commonwealth Bank of Australia announcing that it will allow its 6.4 million customers the ability to buy, sell and store cryptocurrency via the bank’s app.
This combined with crypto spot ETF sets a framework that could be adopted in other parts of the world. It is a stark contrast to China who has banned Bitcoin mining, and America which is set to pass legislation to make crypto trading harder.
Altcoins
Whether or not ASIC will approve altcoin cryptocurrencies is unclear. The approval of Bitcoin and Ethereum however, has many commentators feeling that this is a real stepping stone to altcoin ETFs. Given that altcoins make up 60% of the crypto sphere that is not out of the question. It is believed that BetaShares, VanEck, and Cosmos Asset Management have products in the pipeline.
The Crypto Market
The market is truly bullish at the moment, with Bitcoin, Ethereum and other prominent altcoins moving into ascendency, reversing several weeks of bear market activity. Although the value of Bitcoin is slightly less than the October 20th all-time high of $67,016.50, the price is stable around that figure at the time of writing.
Some of the gains have probably come from spot ETF trading approval from the ASIC. This may be offset somewhat should the U.S’s Infrastructure Bill pass.
One concerning aspect is that the term ‘broker’ would be expanded to include DeFI developers, node operators, miners and so on and so forth. The problem here is that it would make anyone connected to the crypto sphere subject to tax. Critics have pointed out that given how much information and the nature of it needed to comply with this provision would be extremely difficult to do.
Another aspect of the bill that does not sit well with crypto investors is the proposed change to tax code 6050i. Currently, any business or individual that receives more than $10,000 in physical cash or bank transfers has to file it with the IRS. The change would change the world cash to ‘any digital asset’ including cryptocurrency. The information needed to file with the IRS is immense and almost impossible to collect due to the nature of crypto trading.
Although the bill wouldn’t come into effect until 2024 it could serve as a blueprint worldwide, impacting Australia’s investment ecosystem.
Should the bill pass this will no doubt impact the crypto markets negatively and investors could be facing a bearish crypto landscape.
Given Bitcoin among others volatile history, how the landscape pans out is going to be interesting. On the one hand, you have positive news and what appears to progress, then on the other you have legislation that will cause no end of problems not just for investors, but any entity connected with the crypto space.
The next few weeks and months are going to be very interesting indeed.
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