First spot bitcoin ETF application filed under new Australian regulations

Australian bitcoin-focused asset management firm Monochrome is taking another run at a licensed spot ETF amid a wave of US filings

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Casablanca Stock/Shutterstock modified by Blockworks

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An application for Australia’s first fully-licensed spot bitcoin ETF under new regulatory guidelines has been filed with the Australian Securities Exchange (ASX).

Bitcoin-focused asset management firm Monochrome, in partnership with Vasco Trustees, announced Friday the lodgement of an updated application for the Monochrome Bitcoin ETF (IBTC) – intended to provide regulated exposure for retail investors.

The move marks the first instance of a filing for a spot bitcoin ETF on the ASX under a licensing regime featuring crypto provisions, established almost two years ago.

It also follows a year after Monochrome’s partner Vasco received a financial license to operate crypto spot ETFs in the country.

ASIC, the country’s securities regulator, revised its rules for the Australian financial services (AFS) license in October 2021. ASIC sought to promote market transparency amongst crypto firms while enhancing investor protections.

The rules dictate that institutional support and acceptance of the underlying crypto should exist for a spot ETF to go through. “Reputable” and “experienced” service providers must be willing to support those products.

As it stands, there are only currently two AFS licensees, including the issuer behind Monochrome’s ETF, with any retail crypto-asset license authorization. Others are listed as wholesale, meaning they are not yet green-lit to offer such products to mom-and-pop investors.

Other Australian attempts at bitcoin ETFs

Another bitcoin ETF from Cosmos Asset Management’s bitcoin ETF attempted to take the crown as the country’s first last year, spot or otherwise.

That ETF, however, was established as a fund of funds, offering exposure to one of Canada’s spot bitcoin ETFs managed by Purpose. Global X and 21Shares’ Bitcoin ETF ended up being the first to list in Australia, while Cosmos delisted its offering in November due to lack of interest.

Global X 21Shares’s Bitcoin ETF, still trading today, operates using a wholesale-retail feeder fund structure. In this setup, a retail fund invests in a wholesale fund that directly holds bitcoin.

Though the wholesale fund is not subject to the newly instituted regulations specifically aimed at retail funds dealing with digital assets, Blockworks was told.

“What sets us apart from other fund structures is that the Monochrome Bitcoin ETF is authorized under the ‘crypto-asset’ licensing category, which allows the fund to hold bitcoin directly on the fund level,” Jeff Yew, Monochrome CEO, said.

The executive added he was confident that a positive outcome would be reached.

When asked about the poor performance of Australia’s spot bitcoin ETFs, the executive reasoned that Cosmos’ delisting was driven by unfavorable market timing, confusion about the fund’s licensing and operational issues leading to discrepancies between the unit price and bitcoin.

The current climate presents a “different circumstances and product structure/licensing,” Yew said.

Renewed interest in spot bitcoin ETFs has also hit the US, with major institutions such as BlackRock, Invesco and WisdomTree all filing over the past month.


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