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The Australian Securities and Investments Commission (ASIC) issued new industry guidance for firms that plan to issue exchange-traded products including crypto ETPs. The regulator also noted that Bitcoin (BTC) and Ethereum (ETH) are likely to meet the criteria for appropriate underlying assets for an ETP set in the guidelines.
ASIC recently released a set of regulatory requirements for firms seeking to offer ETPs, including exchange-traded funds, managed funds, and structured products. The regulator released the new guidance, which is titled “Exchange-traded products: Admission guidelines” and posted on the regulator’s website on October 29, after market participants requested feedback in June.
The regulator said that guidelines set good practices to ensure adequate admission and monitoring standards for ETPs and propose fair, orderly, and transparent markets. For those who plan on issuing crypto ETPs, ASIC determined that BTC and ETH meet the requirements for underlying assets.
“As of October 2021, bitcoin (BTC) and ether (ETH) appear likely to satisfy all five factors identified above to determine appropriate underlying assets for an ETP,” ASIC wrote. “We expect the range of non-financial product crypto-assets that can satisfy these factors will expand over time.”
ASIC said that market operators should assess a particular crypto asset if it is appropriate for use as the underlying asset for an ETP. The regulator provided five essential factors when assessing crypto assets.
For a crypto asset to qualify as an underlying asset, there must be a “high level of institutional support and acceptance of the crypto-asset being used for investment purposes,” according to ASIC. In addition, there must be reputable and experienced providers such as custodians, index providers, and fund administrations who must be willing to support the planned ETP.
ASIC said that there must be “a mature spot market for the crypto-asset” as well as the presence of “a regulated futures market for trading derivatives linked to the crypto-asset. Lastly, there must be a robust and transparent pricing mechanism for the crypto assets being considered.
