ASIC

Aussie Regulator Strikes Bearish Tone Amid 3 Crypto ETFs Set to Be Delisted

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Australia regularly features among the top five countries in crypto adoption, with one recent survey finding that 21% of Aussies own crypto, some 4.1 million adults. In addition, a further million are expected to be onboarded in the next year. 

And while Australians are entering the fray in growing numbers, there is growing evidence that the Australian Securities and Investments Commission (ASIC) is somewhat hawkish. At face value, the regulator’s crypto position outlined at yesterday’s ASIC Annual Forum held in Sydney left little room for ambiguity.

“The inherent risks associated with investing in cryptocurrencies are often opaque, and the risk equation is never static. They are highly volatile, inherently risky, and complex.”

Joe Longo, ASIC chair

However while such quotes were the ones making headlines, those paying attention to the regulator’s words suggest that ASIC recognises that crypto poses both “challenges and opportunities for regulators and policymakers alike”, as it strives to strike a balance between crypto’s potential benefits and protection of investors from “harms arising from risky, volatile and complex products”. 

ASIC’s balancing act between innovation and investor protection

In its press release of a session titled ‘Where to with crypto?’, ASIC noted that, “The world of crypto is evolving at lightning pace and encroaching further into the functions of traditional finance”. This was further amplified by the pandemic which, according to ASIC’s own research, saw crypto emerge as the second-most commonly traded product type after Aussie shares. ASIC chair Joe Longo said:

“Crypto brings together key issues that ASIC is interested in: technology, innovation, and new challenges for regulation”. Longo added that crypto’s capacity for consumer and investor harm is “really, really significant”, however it was underpinned by somewhat positive caveat.

If you’re looking for the subtext, it’s pretty clear – ASIC distinguishes digital assets (crypto) from the underlying technology (blockchain), and is arguably bearish on the former and bullish on the latter. 

Speaking of blockchain technology and the tokenisation of assets, Longo said that:

“These technologies are driving innovative business models and products. They have the potential to provide new solutions to longstanding problems and greater efficiencies for the benefit of all. Many of these technologies have the potential to revolutionise the way we do commerce.”

He added that ASIC was “observing and monitoring [such] developments while considering [its] own long-term strategic approach”.  After making reference to Reserve Bank of Australia’s recently announced central bank digital currency (CBDC) pilot, ASIC concluded with a note signalling its intention to continue to strive towards striking a balance between investor protection and embracing technological advancements: 

“While encouraging digital innovation, ASIC will act to disrupt and deter conduct that harms people. Harmful conduct that falls within our jurisdiction, including unlicensed conduct and misleading promotion of crypto-asset financial products, is within our sights.”

Crypto winter breaks 3 ETFs

Meanwhile, as most of the attention yesterday went to Australia’s regulator, some bearish Aussie-centric crypto news also made headlines. The asset manager behind Australia’s first crypto exchange traded funds (ETFs) has applied to delist the investment products mere months after its much-vaunted launch. 

K2 Asset Management, the fund responsible for the Cosmos Purpose Bitcoin Access ETF (CBTC) and Cosmos Purpose Ethereum Access ETF (CPET), said in a letter to Australia’s secondary securities exchange, the Cboe, that it would be applying to revoke the ETFs from the market. In the interim, trading has been halted. 

On the same day, another fund focused largely on crypto mining (ticker DIGA), also announced its intention to to be withdrawn from the the market. 

Although details remain scarce, one source speaking in relation to the Cosmos ETFs told the Australian Financial Review that the firm struggled to get enough traction to cover the high operating costs of the fund. Unfortunately, none of the three funds due to be delisted had managed to attract a net asset value in excess of $1 million. Not good.

In the six short months of trading, Cosmos’ Bitcoin ETF collapsed 19%, with its Ethereum ETF fairing only slightly better, being down close to 14% over the period. Two other crypto-focused funds remain on the Cboe and have managed marginally better performance since listing. Notably however, a crypto-focused ETF has yet to be launched on Australia’s main stock exchange, the ASX. 

All in all, it hasn’t been a stellar few days as far as good news is concerned.