The Australian Securities and Investments Commission is soliciting proposals on how it should best regulate crypto-asset exchange-traded funds (ETFs), with the regulator saying it will consider the feedback and release guidelines in the third quarter.

“Crypto-asset ETPs have attracted significant attention globally. ASIC is aware of interest in, and demand for, domestic crypto-asset ETPs. However, there is real risk of harm to consumers and markets if these products are not developed and operated properly,” ASIC said in a media release.

VanEck, BetaShares have both lodged submissions with the ASX to create a crypto ETF and Sydney-based Cosmos Capital has expressed interest in creating a Bitcoin one.

In its 46-page consultation paper, ASIC said that most crypto-assets wouldn’t be suitable for an ETF, given a number of factors including frequency of trading and value of trades.

“At this point in time, in our view, the only crypto-assets that are likely to satisfy these factors are bitcoin (BTC) and ether (ETH),” ASIC said.

Among the questions ASIC is asking is whether it’s possible to price crypto-assets to a “robust and transparent standard,” given that they are traded on multiple trading platforms around the world continuously and simultaneously, and sometimes that prices diverge across platforms and trading pairs.

When it comes to licensing, ASIC proposes creating a new class of financial services licenses involving cryptocurrency.

“We consider crypto-assets do not fall within any existing asset kind that can be selected by an application,” ASIC said.

“We are seeking feedback on proposals to establish a new asset kind that will cover crypto-assets.”

Interested parties have until July 27 to submit feedback on the proposals.

‘The right direction’

Monochrome Asset Management founder and chief executive Jeff Yew told Stockhead that “demand for a well-managed, well-regulated digital asset ETF makes it an inevitable.”

He said that what ASIC was proposing “is good for operators, and more importantly, protects consumers in the long run.

“ASIC understands that demand for a digital asset ETF isn’t going away and it’s time to shift operational & custody risks to professional managers.”

He said Monochrome had been working with peers and regulators for years, “and we’re really happy to see things moving in the right direction”.

International outlook

In the United States, Cathie Wood’s Ark Invest and 21 Shares partnered to become at the least the 14th issuer to file for a Bitcoin-themed ETF – but the Securities and Exchange Commission is yet to approve any of them.

Canadian regulators have approved several Bitcoin and Ethereum-themed ETFs, and a bitcoin one made its debut on Brazil’s stock market this week.

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