The Australian Securities and Investments Commission has taken cautious but slow steps in relation to an exchange-traded product that tracks the performance of bitcoin and other cryptocurrency.
The organization has published new guidance detailing the regulatory requirements for crypto ETPs. This includes exchange-traded funds and structured products. This guidance will ensure investor protection and increase transparency.
SIC Supports Bitcoin and Ether-backed Fonds
According to the published document, any cryptocurrency that is used to back an ETP (or other structured product) must meet five criteria. These are:
High level of institutional support and acceptance and being used for investment purposesAvailability of service providers such as custodians, fund administrators, market makers, and index providers that are reputable and experienced as well as prepared to support ETPs that invest in or offer exposure to the crypto-assetAvailability of mature spot marketPresence of regulated futures market for the purpose of trading derivatives linked to the crypto-asset,Price mechanisms should be robust and transparent for the asset throughout the trading day and strike a NAV price.
ASIC claims that these factors were created with the intention of supporting a fair, orderly, and transparent market. It guarantees that only digital assets that meet these criteria will be allowed to participate in the ETP structure. This regulatory entity hopes that it will reduce the risk of price manipulation.
ASIC also confirmed that Ethereum and Bitcoin, the largest cryptocurrency, qualify for the program based on the previously mentioned factors.
While it has given the green light to set cryptocurrency-backed funds dedicated to retail investors, products linked to BTC and ETH are the only ones that will be eligible for approval so far. ASIC anticipates that other assets will be added to ETPs in future.
The Regulatory Climate in Australia
There has been a steady demand for investment vehicles for Bitcoin (BTC), and Ethereum (ETH), for a while, long before Wall Street opened its doors to this sector. However, the launch of the Bitcoin Futures ETFs last week has reignited the long-running debate about the safety of crypto-backed investments products. However, this hasn’t stopped other firms from making similar proposals.
Many countries now struggle with how to approve investment products that are backed by volatile and unregulated digital assets. Australia is in a similar position.
This news comes just one week after the Australian Senate Committee recommended a clearer, more robust and friendlier regulatory framework to support the country’s growing crypto ecosystem.
Marla Brooks – Financial Analysis
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