‘Watershed day’ – Aussie ETF providers react to US SEC approval of Bitcoin ETFs
Aussie ETF providers have reacted in overwhelmingly positive fashion to news regulators in the US have approved the launch of spot Bitcoin ETFs, enabling investors to easily access the 15-year-old cryptocurrency through traditional securities exchanges.
BetaShares’ head of digital assets Justin Arzadon says while regulators in many countries have approved spot Bitcoin ETFs, including Australia, none are bigger than the US.
“The US Securities and Exchange Commission’s (SEC) decision to approve spot bitcoin ETFs from a range of fund managers is a watershed day for the maturity of Bitcoin,” he says.
Arzadon says the much anticipated move to approve a spot Bitcoin ETF will finally provide US-based investors with an option to invest in the cryptocurrency via a familiar ETF structure.
“The SEC’s approval of spot bitcoin ETFs should add further confidence to the digital asset ecosystem and could pave the way for Wall Street to move deeper into cryptocurrencies as an asset class,” he says.
“The anticipated flows into US-traded spot bitcoin ETFs in the initial days after launch are expected to be significant and would serve as an endorsement of the global investor preference for ETFs over other investing structures.
“Specifically for Bitcoin, it removes the need to directly navigate issues related to storage and safekeeping, as well as providing buying options beyond unregulated exchanges.”
Furthermore, Arzadon says while traditional finance has talked a big game about moves into digital assets, the reality has been more mixed in the wake of continued volatility for the sector.
“The decision by the SEC is expected to provide further confidence and legitimacy to the digital assets ecosystem as it matures as an asset class,” he says.
Global X, the provider of Australia’s only two spot cryptocurrency ETFs, has also welcomed news of the SEC approval in the US.
The ETF’s provide holders access to physical cryptocurrencies held in cold storage by Coinbase, the world’s largest custodian of cryptocurrencies.
CEO of Global X ETFs in Australia Evan Metcalf says ETFs provide investors with a regulated and accessible way to gain exposure to cryptocurrency price movements without the complexities associated with direct ownership.
He says the SEC’s approval affirms the maturation of the cryptocurrency space, strengthening its position as a legitimate and promising avenue for investors.
“This decision aligns with our vision of broader global acceptance of digital assets and addresses the escalating demand for investment opportunities in the cryptocurrency sector,” Metcalf says.
“It is encouraging to witness a growing recognition of digital assets as a legitimate investment class, and we anticipate heightened demand for this type of exposure from investors, particularly here in Australia.
“The notable rallies of Bitcoin and Ethereum this year further underscores this growth potential.”
VanEck Asia-Pacific CEO and managing director Arian Neiron told Stockhead the asset manager has long advocated for the ETF wrapper as an effective and convenient solution for investors seeking Bitcoin exposure without the need for self-custody.
He says VanEck was the first established ETF issuer to file for a futures-based Bitcoin ETF in 2017 and followed that up with a filing for a spot Bitcoin ETF in 2018.
“Despite regulatory headwinds in the US, the firm’s digital assets efforts continued with product development and investment globally,” he says.
“The firm’s European arm currently manages 12 crypto ETPs, and its MarketVector index subsidiary was the first to launch a definitive suite of digital asset indexes with its flagship Bitcoin and Ethereum benchmark rates.”
He says the SEC approval transforms crypto into a regulated asset class in the US and is undeniably a significant step in the maturity and mainstream acceptance of Bitcoin and digital assets broadly.
“It enables the wealth management community and individuals to access Bitcoin via a regulated and insured investment vehicle, opening up the asset class to institutional investors including hedge funds, sovereign wealth funds, pension funds, 401Ks and registered investment advisors,” he says.
Furthermore, he says VanEck has a long-standing and deep heritage in investing in gold and so store-of-value investing is in its DNA.
“We see Bitcoin as a form of digital gold,” he says.
“It is a finite asset and a lot of new generation investors see it as a hedge against inflation and quantitative, while offering providing important portfolio diversification as Bitcoin is an uncorrelated asset.”
Neiron says VanEck was also the first ETF provider in Australia to announce it was working with ASIC and the ASX on bringing a spot Bitcoin ETF to the ASX, as well as an Ethereum ETF.
“This was back in early 2021 when we formally lodged our submission,” he says.
Neiron says the company continues to be in talks with the ASX.
“However, it is critical to ensure Australian investors have the same high-quality investing experience with Bitcoin ETFs on ASX as they have with other ETFs in Australia,” he says.
“That is, tradability, price discovery and, importantly, investor protection.”
Neiron says the custody of crypto assets is paramount to ensure investors’ assets are protected and compliant with Australian custodial obligations.
“At this stage, the clearing requirements are quite onerous for market participants such as brokers, which makes the economics challenging,” he says.
“Furthermore, there are next to no digital asset custodians in Australian that abide by the custodian requirements, which again contribute to the difficulty surrounding launching in this market.”
An ASX spokesman told Stockhead that in August 2022 the bourse amended the AQUA rules (the rules that deal with the admission of ETFs on ASX) to establish a new category of permissible underlying assets for ETFs, which includes crypto assets Bitcoin and Ethereum.
“The ASX continues to engage with a number of issuers that are interested in admitting crypto-asset based ETFs,” he says.
BetaShares says it is working to bring to the ASX Bitcoin and Ethereum to the market under the tickers 1BTC and 1ETH.
Arzadon says the move to approve a spot Bitcoin ETF in the US may provide a long-term tailwind to the companies which service the crypto ecosystem.
“The so-called ‘picks and shovels’ of the crypto economy will perhaps see higher demand for many of their services as traditional finance moves deeper into the sector,” he says.
BetaShares Crypto Innovators ETF (ASX:CRYP) – which focuses on digital currency and blockchain-associated companies or the ‘picks and shovels’ – was a star performer of the Australian ETF industry in 2023.
CRYP, which broke an ETF record when it listed on the ASX on November 4 2021, by attracting more than $8 million within 45 minutes, rose more than 200%. CRYP currently has more than $120 million in assets under management (AUM).
Arzadon says while the SEC decision is positive for one for the digital assets ecosystem, investors should not get ahead of themselves when it comes to allocations to the asset class.
“Digital assets remain highly volatile and as a result should only form a very small part of an overall portfolio,” he says.
“Investors should generally look to build a diversified portfolio core around Australian and international equities as well as bonds.
“Depending on their circumstances, investors might then consider including a small allocation to digital assets within the alternatives component of their portfolio.”
Stockhead’s resident crypto go-to-guy Rob Badman has more coverage on the SEC decision: