A looming spot ETF and major regulatory advancements have given Australian crypto executives renewed optimism. The asset class is now firmly entrenched in the market’s mainstream.
The Commonwealth Bank of Australia has moved into the space, and Rest Super told the market that it was giving serious consideration to investing in crypto.
In late 2021, the Australian Securities and Investments Commission gave a tentative green light to a crypto spot ETF, or “ETP”, after Australia’s two biggest stock exchanges each listed their first crypto-focused ETFs, both of which went on to break records on debut.
Federal Treasury even gave its tick of approval to the asset class, even if only to slight the central bank.
Lasanka Perera, chief operating officer at crypto exchange Independent Reserve said that, as a result, the local market is likely to see serious institutional exposure.
“I think, between Rest Super and CBA announcing that they’ll be offering limited crypto exposure to their user base, they’ve put the rest of the financial services sector on notice,” Perera said.
“They’ve taken some serious career risk off the table, starting conversations at every bank in Australia; every super fund, and a lot of other financial institutions, who are now being forced to see crypto as a very serious, important asset class they need to be offering to customers.”
Australia is amongst the most “crypto-ready” countries in the world
Australia is among the keenest adopters of crypto in the world, with an average of various surveys finding that between 15% and 20% of Australians have some stake in the asset class.
Perera said the asset class has become exponentially popular. Independent Reserve’s Australian Index found that the adoption and awareness of crypto in Australia has “more or less doubled” over the last year.
“And I expect that that’ll probably happen again next year. So we might be in a situation where maybe 40% to 50% of Australians are touching crypto in some way,” Perera said. “With that, you’ll start to see even more major partnerships.”
Crypto exchanges have already made noteworthy efforts to enter the consciousness of average consumers. In May 2021, CoinJar and CoinSpot each brokered major sponsorship deals with the Melbourne Demons and Western Bulldogs respectively.
Swyftx, another Australian exchange, followed suit when it announced it had brokered a sponsorship deal with the Bathurst 1000.
User demographic continues to broaden
Even as institutional investment interest continues to heat up, some critics remain sceptical over whether crypto has any material day-to-day utility, and if the barrier to entry may still be too high for the average consumer.
Andrew Gretch, CEO at the Australian crypto debit card outfit CryptoSpend, said he’s been seeing the opposite.
Not only has his operation seen a marked lift in crypto spending for the most banal of expenses, he said, but the company’s user demographic has broadened dramatically.
“We have this one user, and she is about 70 years old,” Gretch said. “What’s interesting about that is, the market beforehand was very skewed towards men — we’re talking over 90%.”
“It was mainly a bit of Gen Z and millennials, right. But then, now we’re seeing a lot of older people actually sign up. It’s been quite surprising because we were expecting just to get millennials, who maybe live on the east coast, signing up,” he said.
“But instead we’ve been seeing people from the country, who may be older and female. Obviously, we still have a lot of users that fit that [younger] demographic, but we didn’t expect it to skew as much as it actually has, which is much more diverse.”
Navigating crypto legislation
As user uptake surges, and institutional investors circle the asset, Perera says progressive crypto legislation will be crucial to the Australian market’s growth.
Recommendations made in a final report handed down in a Senate committee headed by Liberal senator Andrew Bragg go a long way in getting there, Perera said. He’s optimistic that Australia could see meaningful legislation by 2023.
“Senator Bragg is somewhat of a shining light for the industry in Australia,” Perera said.
“He’s increased awareness among a number of levels of stakeholders, and I think there’s going to be movement at a legislative level,” he said.
And funds inched closer to another regulatory milestone when ASIC gave a tentative greenlight to fund managers looking to launch ETFs with underlying crypto assets.
After months of industry consultation, the corporate regulator issued its response to the use of “crypto assets as underlying assets for exchange traded products”, or “ETPs”, along with new guidance for the space, which details a raft of regulatory requirements for the funds eager to offer ETFs with underlying crypto assets.
The future of ETFs
For Dan Annan, CEO at Cosmos Asset Management — the fund responsible for issuing Australia’s first and “purest” crypto-focused ETF — all eyes will be on the first to secure the market’s first crypto spot ETF, which he said his fund is close to achieving.
“We were one of the first issuers to submit a Bitcoin ETF to the regulator, so that opened the door for conversations around how best to do this,” Annan said.
“Some exchanges will need to tweak their current framework for listing products to be able to meet those [regulatory] guidelines and work with the regulator to ensure that they tick that box,” he said.
“There’s been a lot of pent up demand for the digital coin ETF, and I think there’s definitely potential for delivery of a Bitcoin ETF.”