Australian securities regulator says crypto ETPs pose unique risks
06:04, 30 June 2021
The Australian Securities and Investment Commission (ASIC) said today that cryptocurrency-based exchange-traded products (ETPs) aimed at retail investors pose “unique features and risks” that need to be recognised by their issuers. As a result, it has released a consultation paper to help it “finalise its positions on good practices for market operators and product issuers”.
ETP is the umbrella term for the collection of financial products traded on a stock exchange that include exchange-traded funds (ETFs). It is important to note that ETFs are a subset of ETPs – not the other way round.
The price of bitcoin, the largest cryptocurrency by market capitalisation, has been on a wild ride throughout 2021 - it recently slipped below $30,000, after reaching a high of almost $65,000 in April. Now, Australian regulators may step in to mitigate the risks that exchange-traded securities linked to this asset class pose to retail investors.
Market operators
ASIC is consulting market operators and issuers on two key issues:
- identifying cryptoassets that are appropriate underlying assets
- establishing good practice in respect of pricing, custody, risk management and disclosure
“Market operators and product issuers need to be mindful of meeting their existing regulatory obligations when creating, operating and allowing such products, so they can be facilitated in a way that maintains investor protections and Australia’s fair, orderly and transparent markets,” ASIC Commissioner Cathie Armour said.
So far, no cryptocurrency ETPs are listed on the Australian Securities Exchange (ASX). According to a report on CoinDesk, however, ASX does have plans to include one in 2021.
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Mixed views
Regulators around the world have expressed mixed views about crypto ETFs. While Swiss authorities allow this type of product, the UK’s Financial Conduct Authority has barred UK investors from the asset class. The US Securities and Exchange Commission recently postponed a decision over whether to give the go-ahead to two proposed bitcoins ETFs.
The ASIC consultation closes on 27 July.
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