Dr. Alpay Soytürk, Chief Regulatory Officer of Spectrum Markets, the pan-European trading venue, issued the following comment in response to the news that the Australian Securities Exchange (ASX) has approved the listing of its first spot Bitcoin ETF.
‘’Following the authorisation of ETFs on bitcoin, the US Securities and Exchange Commission (SEC) has also given the green light for ETFs on ethereum. Actually, the SEC approved 19b-4 filings for eight spot ether ETFs, but the agency has not yet greenlighted the S-1 (registration statement) filings, which must be completed and declared effective before the spot ether ETFs can launch.
More clarity on the latest developments in the approval procedure has been provided by Gary Gensler, SEC chairman, during his testimony before the U.S. Senate Appropriations Subcommittee on Financial Services. Pressed by questions raised by senators, Gensler stated that the final greenlight to spot ether ETFs could come as soon as this summer. However, the proceedings needed for the greenlight are duties to be managed by the issuers, not by SEC’ staff.
In the meantime, ASX (Australian Securities Exchange), which accounts for around 80% of the country’s equities trading, has approved its first bitcoin spot ETF. This represents the third in Australia, following the two already available on rival exchange Cboe, and such a decision could influence other regulators to make similar decisions, contributing to the growth and maturation of the global cryptocurrency market.
Although these news testify the evolution and wider acceptance of crypto assets, it is unlikely we are going to see something similar in Europe soon. The reason lies behind the UCITS Directive, which contains diversification rules for the inclusion of indices as ETF underlyings, and virtually none of them allow for a disproportionate concentration risk on individual securities.
This also calls for a reconsideration of how the protection provided by authorization from a securities regulator should be evaluated. We do not intend to criticize the whole Bitcoin or Ethereum projects, but rather to question whether authorizing investment funds in individual securities is a sensible measure.
Of course, the ETFs now authorized offer the opportunity to gain exposure to bitcoin or ethereum without having to hold the crypto assets directly. But firstly, there have been alternatives in this country before, such as securitised derivatives on BTC or ETH. Secondly, the ETF authorisation paves the way for large institutional institutions to become heavily involved in distribution, as the fierce fee competition among large US asset managers has already shown in the recent past. If this results in private investors with a rather conservative risk profile and investment objectives that do not correspond to this type of security becoming more involved and being unable to adequately compensate for strong downturns, securities regulators will be caught in the crossfire. ‘’
