Right on the end of financial year, ASIC released Consultation Paper 343: Crypto-assets as underlying assets for ETPs and other investment products (CP 343). There are some laudable ideas in this consultation, but there remains a way to go before crypto-asset, cryptocurrency, or digital asset ETPs become mainstream investments in Australia.
ASIC is proposing to:
- identify crypto-assets that could be considered appropriate underlying assets for an ETP
- establish a new category of asset and regulatory framework for crypto-assets and;
- restrict the crypto-assets a registered managed investment scheme (MIS) is authorised to hold (e.g. to Bitcoin or Ether)
ASIC has also proposed expectations of “good practices” for:
- robust and transparent pricing of crypto-assets
- responsible entities, in relation to the custody of crypto-assets
- the risk management systems of responsible entities that hold crypto-assets
- responsible entities, in relation to their PDS disclosure obligations for registered managed investment schemes that hold crypto-assets.
ASIC is proposing not to provide further expectations in INFO 230 in relation to crypto-asset ETPs or guidance on how the design and distribution obligations (DDO) can be met for investment products that invest in, or provide exposure to crypto-assets.
The consultation is open for an unusually short time, and is positive in that it sets out sensible custody frameworks, but unhelpful in that it proposes moving Australia out of alignment with more progressive jurisdictions like Canada which have permitted exchange traded products and funds with Bitcoin backing, and the movement towards treating digital assets as the commodities that they plainly are.
We are hopeful that sensible submissions are made which are supportive of the innovation that crypto assets can bring, with a commodity treatment and sensible custody rules bringing the ‘light touch’ regulation that the Australian Government has indicated it wishes to have in place for these assets.
