Cryptocurrencies such as Bitcoin are at an interesting time right now – seemingly poised to break into the mainstream or suffer a slow death due to a lack of regulation.

Even central banks are starting to realize the pros and cons of cryptocurrencies and their underlying blockchain technology, but they are also reluctant to step up and do anything about it.

At the same time, the arrival of a crypto-based exchange-traded fund in Australia – and similar funds appearing in overseas markets – is rapidly pushing towards cryptocurrencies and related companies becoming a mainstream investment – although more risky – for individuals and pension funds.

Bank of England admits potential but wants regulation

Bank of England Deputy Governor Jon Cunliffe is the latest central banker to admit cryptocurrencies are interesting but in desperate need of “regulatory clarity.”

He said a crash in the cryptocurrency markets is a “plausible scenario”, citing a lack of intrinsic value, the possibility of contagion between crypto assets, operational vulnerabilities and “the power of herd behavior.”

However, you can say the same about the value of the pound sterling or any other currency in a free trade environment – the difference is that globally, so far, no regulator only rose to provide a suitable regulatory platform for the $ 3 trillion cryptocurrency market. .

The only real action came from China, which banned crypto mining and trading in September with its usual brutal, totalitarian approach – hitting video gamers at the same time.

This may have caused temporary drops in cryptocurrency prices, but it is unlikely to dampen the current global enthusiasm for cryptocurrencies.

“Big advantages” of regulation

Even with his grim assessment of cryptocurrency volatility, even Jon Cunliffe admits that they have huge potential, if regulation were to come soon.

“Indeed, bringing the crypto world effectively into the regulatory perimeter will help ensure that the potentially very significant benefits of applying this technology to finance can flourish in a sustainable manner,” he said. “He must be pursued urgently. “

Despite the lack of official enthusiasm for cryptocurrencies, the popularity of Bitcoin, Ethereum and other digital assets has exploded as the COVID-19 pandemic and burgeoning government stimulus programs have attracted a flood of young investors in the region.

Strong interest from young investors

Interest from these young investors has been so strong that large investors and pension funds are paying much more attention to the investment opportunity at a time when historically low interest rates are holding back the returns of many classes. of assets.

Financial planners are also showing interest, as many of their clients ask them questions about how to invest safely in crypto.

In Australia, there is a parliamentary inquiry into cryptocurrency regulation, led by Senator Andrew Bragg, which is expected to deliver its recommendations by the end of the month.

Senator Bragg has said he would like to see Australia keep pace with countries such as Canada, the UK, Singapore and Switzerland in regulating digital assets.

Even the exchanges have taken a cautious approach to cryptocurrencies, with not all exchanges willing to list companies whose primary asset is holding coins such as Bitcoin or Ethereum.

Australian ETF is expected to arrive soon

Betashares is set to launch a Crypto Innovators exchange-traded fund soon, but it will not give direct exposure to cryptocurrencies or crypto markets.

Instead, it provides exposure to global digital asset companies, from mining to exchanges, and aims to track the Bitwise Crypto Industry Innovators Index, which underpins another ETF listed on the New Stock Exchange. York.

ASX has been reluctant to allow crypto-related companies on the exchange, saying it assesses the suitability of bitcoin-linked ETFs under the AQUA rules, which cover underlying investments, experience and qualifications. of the issuer, as well as price transparency and liquidity requirements. .

BetaShares chief executive Alex Vynokur said the lengthy approval process for the Crypto Innovators ETF (set to trade under CRYP) would be worth it, due to “real investor demand” for “development. most important since the launch of the Internet. “

He said the ETF will provide more investor protection, transparency and accountability when it comes to buying cryptocurrencies in unregulated locations.

ASIC finalizes trading rules for crypto

BetaShares said that 85% of the Bitwise Crypto Industry Innovators Index focuses on companies that derive at least 75% of their income from directly serving the crypto markets or have 75% of their net assets in crypto holdings. -direct liquid assets.

The arrival of the first Australian crypto ETFs, with VanEck also planning an offering, is expected to boost the crypto march into the mainstream investment scene.

The Australian Securities and Investments Commission is also finalizing a consultation process to explore the potential of cryptocurrency ETFs to trade on the local exchange, with these findings intended to help ASX and Chi-X decide what type of exchange. crypto-assets they will authorize to list.

Countries lagging behind in international developments risk seeing innovative local companies flee to register elsewhere – something that has already happened in the United States and Britain.

The United States Prepares For Bitcoin ETFs

This fear of missing out is perhaps what prompted US regulators to belatedly consider allowing ETF trading on the basis of Bitcoin futures.

Bitcoin rallied sharply last Friday to hit US $ 61,358.40 (A $ 82,675.95) as traders grew convinced that US regulators would approve the launch of an exchange-traded fund on the basis of its futures contracts.

Bloomberg News reported that the U.S. Securities and Exchange Commission (SEC) is set to allow the first U.S. bitcoin exchange-traded funds (ETFs) to begin trading this week, with providers such that VanEck Bitcoin Trust, ProShares, Invesco, Valkyrie and Galaxy Digital funds all have active apps for these ETFs.

It is believed that ProShares and Invesco are closest to approval and would gain a significant first-mover advantage if they became first to market.

If such ETFs are allowed, they could go a long way in legitimizing the use of Bitcoin and could facilitate investments from a range of traditional investors, including pension funds and individuals.

The SEC has already approved Volt Equity’s ETF, which tracks stocks with high bitcoin exposure, similar to the Australian model of BetaShares.

Crypto ETFs are already trading in Canada and Europe.


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