Australia’s first spot Bitcoin exchange-traded fund (ETF), which directly holds the asset, is set to launch for trading on Tuesday.
The Monochrome Bitcoin ETF (IBTC) will commence trading on the Cboe Australia exchange on June 4.
This launch marks a significant milestone in the Australian financial market, providing investors with a new, regulated way to gain direct exposure to Bitcoin.
Direct Bitcoin holdings and regulatory compliance
While Australia already has several exchange-traded products offering exposure to Bitcoin, the Monochrome Asset Management’s ETF is the first to receive approval under a new crypto asset licensing category established under Australian Financial Services (AFS) licensing rules in 2021.
This approval allows the ETF to hold Bitcoin directly, setting it apart from previous products that only provided indirect exposure.
Monochrome Asset Management has emphasized the security of IBTC’s holdings, stating that the Bitcoin will be stored offline in a device not connected to the internet, meeting Australian institutional custody regulatory standards.
This setup aims to ensure robust protection for investors, adhering to stringent custody solutions.
Before IBTC, Australian investors were only able to invest in ETFs that indirectly hold Bitcoin or through offshore Bitcoin products, both of which don’t benefit from the investor protection rules under the directly held crypto asset AFS licensing regime.
Market anticipation and future plans
Monochrome CEO Jeff Yew expressed confidence in the strong interest for the new ETF, driven by the consistent growth of indirect Bitcoin ETF products.
Yew highlighted that the ETF allows in-kind redemption from investors, a feature that distinguishes it from its U.S. counterparts, which are cash-settled.
“We are also exploring other thematic opportunities within the digital asset sector to meet investor demand,” Yew added, indicating plans to potentially launch an Ether ETF that would also directly hold the asset.
Global context and future outlook
The launch of IBTC in Australia follows the recent introduction of four spot Bitcoin ETFs in Hong Kong on April 30.
However, three of these ETFs have experienced net outflows since their inception, with only Bosera’s spot Bitcoin ETF seeing net inflows.
In contrast, U.S. Bitcoin ETFs have seen significant activity, with a cumulative inflow of $13.9 billion, albeit offset by $17.9 billion in outflows from the Grayscale Bitcoin Trust.
Yew believes that Australia’s strong interest in cryptocurrencies will lead to substantial inflows into the new ETF.
He anticipates that local spot Bitcoin ETFs could generate between $3 billion to $4 billion in net inflows within the first three years, highlighting Australia’s position as a “very crypto-heavy country.”
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