The Australian Securities and Investments Commission has taken cautious but slow steps in relation to an exchange-traded product that tracks the performance of bitcoin and other cryptocurrency.

The organization has published guidance outlining the regulatory requirements for crypto ETPs. This includes exchange-traded funds and structured products. This guidance will ensure transparency and investor protection.

ASIC Supports Bitcoin and Ether backed Funds

The published stated five criteria for a cryptocurrency to be considered a permissible asset in order to back an ETP, or any other structured product. These are:

• High level of institutional support, acceptance and being used to invest
• Availability of service providers such as custodians, fund administrators, market makers, and index providers that are reputable and experienced as well as prepared to support ETPs that invest in or offer exposure to the crypto-asset
• Availability of mature spot market
• Presence of regulated futures market for the purpose of trading derivatives linked to the crypto-asset,
• Price mechanism should be transparent and robust for the asset during the trading day. It should also strike a NAV Price.

ASIC believes these factors were created with the intention to promote a fair, orderly, and transparent market. It guarantees that only digital assets that meet these criteria will be allowed into the ETP structure. This regulatory entity hopes to reduce the risk of price manipulation concerns.

ASIC also confirmed that Ethereum and Bitcoin, the largest cryptocurrency, qualify for the program based on the aforementioned factors.

While it has given the green light to set cryptocurrency-backed funds dedicated to retail investors, products linked to BTC and ETH are the only ones that will be eligible for approval so far. ASIC anticipates that other assets will be added to ETPs in future.

Australian’s Regulatory Environment

The demand for new investment vehicles in Bitcoin (BTC), and Ethereum (ETH), has been growing for a while, long before Wall Street opened its doors to this sector. The launch of last week’s Bitcoin Futures ETFs, however, reignited the age-long debate over the safety of crypto-backed investment products. However, that hasn’t stopped other firms from making similar proposals.

In light of this, many countries are struggling with how to approve investment products that are backed by volatile and unregulated digital assets. Australia is in a similar position.

The news comes just a week after the Australian Senate Committee recommended for more clarity, robust, and friendlier regulatory framework for the burgeoning crypto ecosystem in the country.