Failure to launch: Crypto ETFs hit listing snag


Kanish Chugh, head of distribution of ETF Securities, confirmed the firm’s pending launch of its ETFS 21 Shares Bitcoin ETF and ETFS 21 Shares Ethereum ETF were subject to a “temporary delay”.

“The delay is no fault whatsoever of ETF Securities, our ETFs, or the exchange,” Mr Chugh told The Australian Financial Review. “We believe the issue affects all fund managers equally and has caught everyone by surprise. We are working to resolve this as quickly as possible and remain on track to launch Australia’s first bitcoin and ethereum ETFs.”

‘Service provider downstream’

Instead, the blame was placed on a “service provider downstream” who needed more time to support the trade of the products. Both Cosmos and ETF Securities declined to name or even describe the service provider.

But it is understood the entity holding up trade for both firms is a “prime” or “executing” broker whose approval is required in order for the market maker – an appointed market infrastructure provider that sets bid and offer prices daily for ETFs – to ensure smooth operation of the market.

Lawyers for both Cosmos and ETF Securities were holed up over the Anzac Day long weekend in negotiations with Cboe and relevant market makers and brokers. Market makers registered with Cboe include Citi, Flow Traders, Nine Mile Financial, Susquehanna and Virtu Financial.

A Cosmos spokesman said: “Cosmos AM has approval from the exchange to commence quoting and we’re working towards that goal.” The firm, which is owned by bitcoin miner Mawson Infrastructure Group, declined to comment further.

But sources close to the Cosmos camp said they were hopeful its chosen structure – buying units in the existing Purpose Bitcoin ETF listed on the Toronto Stock Exchange instead of directly in bitcoin – would be more palatable to the prime broker, allowing it to list before its rival.

ETF Securities head of product Evan Metcalf said the firm was “disappointed with this setback”, while its pioneering chairman, Graham Tuckwell, who launched the world’s first gold ETF in 2003, previously said crypto ETFs had faced the longest processing time ever experienced in his long career.

Mr Tuckwell in January claimed ASX Clear, the Australian Securities Exchange’s independent clearing subsidiary, had been behind the multi-month delay in a bid to provide a competitive advantage to its parent company, which also intends to quote crypto ETFs in the near future.

ASX Clear ‘good to go’

But ASX Clear last week said it would begin clearing crypto ETFs on Cboe from April 27 and its position has not changed despite the delay.

“ASX Clear is good to go,” said an ASX spokesman. “Matters are now in the hands of the trading venues (in this case Cboe) and their issuers and brokers.”

Fund managers including VanEck Australia, BetaShares and Monochrome Asset Management have applied to list crypto ETFs on the main ASX exchange, but have not yet lodged product disclosure statements with the Australian Securities and Investments Commission.

Last October, ASIC released guidelines to the market permitting the production and trade of cryptocurrency-backed ETFs but restricted the market to large-cap crypto assets bitcoin and ether.

Regulators in global markets, including the US, are yet to approve the trade of crypto ETFs.

The Financial Review revealed on Monday that the first batch of crypto ETFs will be the most expensive in their category of Australian-listed, passively managed or index-tracking funds.

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