Issuing fund managers, brokers, and market makers have been locked in negotiations to complete the “standard checks” needed for Cboe to begin listing funds.
Its launch comes when bitcoin is trading at a six-month low and high-profile cryptocurrency-related stocks have lost more than half of their value to date. The price of bitcoin has dropped 11.7 percent in the last five days, trading at $ 44,896 per coin at the time of writing.
But Cosmos chief executive Dan Annan said he did not expect the unfortunate timing of the bitcoin price and price delay – which the Cosmos Purpose Bitcoin Access ETF is tracking – to dampen enthusiasm.
“Bitcoin is a class of volatile assets and what we are seeing now is a risky environment that is affecting the price,” Annan said. The Australian Financial Review. “It is always prudent for investors to understand where their exposure fits within their own asset allocation.”
He announced that the two-year cryptocurrency fund manager would waive two-month management fees on the new ETF.
“Investors have been anxiously awaiting Australia’s first bitcoin ETF for a long time,” said Annan, a former BlackRock executive and professional football player in the United States. “As a reward for all our investments, for their patience or impatience, we waived the fees for the first two months.”
Liabilities, large commissions
O Financial review reported in April that Cosmos crypto ETF and its two competitors of Securities ETFs would be the most expensive non-leveraged and passively managed funds in the local stock market, all charging a management fee of 1.25 percent per annum.
Unregulated cryptocurrency exchanges and traditional wealth managers have criticized rates as too high for a passively managed fund that does not seek to outperform the market. Issuers said the custody and security of cryptographic assets contain unique costs, which are reflected in the rate card.
In addition to the delay caused by the trading concerns of third-party brokers over the past two weeks, the campaign to list crypto ETFs has been a multi-year process.
Mawson Infrastructure took the first steps to create a listed cryptocurrency ETF in Australia in 2016, initiating discussions with offshore fund managers, including the Grayscale Bitcoin Trust, about a potential local food fund.
Cosmos director and venture capitalist Martin Rogers has embarked on a lengthy lobbying campaign, meeting with senior Morrison government officials on several occasions to defend cryptocurrency ETFs.
The process involved costly back-and-forth negotiations with the Australian Securities and Investment Commission, which in June last year expressed public concern about such a product, warning of a “real risk of harm” to retail investors.
Disputes arose over the definition of cryptocurrencies under the law. Although Cosmos argued that they should be considered a commodity and therefore be regulated in the same way as a gold or oil ETF.
Finally, ASIC agreed to establish a new category of “cryptographic assets” and in October last year finally gave the green light to bitcoins and ethereum ETFs to trade in the local stock market. ASIC guidelines have banned funds invested in small so-called altcoins and imposed a number of strict custody and disclosure requirements.
The regulator has denied being responsible for the delay in recent weeks, saying the delay was a business affair.
Another hurdle came in the form of harsh margin conditions imposed by clearing authority ASX Clear. The 42 percent margin required to compensate participants as collateral, apparently due to the volatility of the cryptocurrency markets, meant few brokers were willing to participate, resulting in a several-month delay.
Annan said he was “upset” that other fund managers were apparently supporting Cosmos’ legal and lobbying efforts to launch their own funds. Canadian firm 3iQ has applied to list a feed fund for its Toronto-listed bitcoin ETF on Cboe.
VanEck Australia, BetaShares and Monochrome Asset Management have requested the listing of cryptocurrency ETFs on ASX’s main stock exchange, which market sources believe is at least six weeks away.
But Securities ETF President Graham Tuckwell, who traded the world’s first gold ETF nearly 20 years ago, has also been in talks with ASIC since at least 2017.
Mr. Tuckwell told you earlier Financial review that the admission process for your company’s 21Shares Bitcoin ETF ETFS and 21Shares Ethereum ETF ETFS is the longest you have experienced in your career.
In a statement issued earlier this week, ETF Securities said it had “won the race to launch Australia’s first Bitcoin and Ether ETFs, ending a multi-year competition between ETF providers”.
The claim was based on his interpretation that the outstanding Cosmos and 3iQ did not count because they are indeed offshore ETF feed funds listed on foreign markets.
Instead, ETF Securities has established an Australian sub-fund that owns directly and can be exchanged for bitcoins and ether (the token linked to the Ethereum blockchain). The fund will be co-managed by 21Shares, based in Switzerland.
“The launch, the first of its kind in Asia, is an important step in the incorporation of cryptocurrency ownership,” the statement said.
The CBA declined to comment beyond a statement on the CommSec website urging investors to read the product disclosure documents before purchasing units in the funds and consider seeking professional advice.
The three funds will begin trading at 10:00 a.m. AEST on Thursday.