Australia Securities Regulator Warns of Risks as ASX Readies Bitcoin ETF Trading

The Australian Securities and Investments Commission (ASIC) has issued a warning to all prospective investors ahead of the Australian Stock Exchange’s (ASX) first Bitcoin exchange-traded fund (ETF) launch.

Australia Securities Regulator Warns of Risks as ASX Readies Bitcoin ETF Trading

An ASX spokesperson reminded would-be investors about the inherent risks typical of cryptocurrencies, asking interested persons to take caution. The spokesperson specifically said that investors should only deposit funds amounts they are comfortable losing. According to the official:

“ASIC has repeatedly warned investors that crypto is risky, inherently volatile and complex.”

While Bitcoin adoption is on the rise, especially with gradual approvals of ETFs in multiple countries, the sector’s volatility has proven to be cause for concern over time. Although the ETFs are touted as positive for the industry, investors are advised to conduct extensive research before any deposits. Investors may also check information about historical data and price predictions for the king coin.

Growing use of Bitcoin and lower volatility will also be of benefit to those who use the coin to make everyday purchases, for example when buying overseas, as fiat currencies are less practical. What’s more, Best Crypto Casinos says people enjoy gambling with Bitcoin because they can enjoy higher withdrawal limits and bigger bonuses and promotions. Should Bitcoin’s price become higher and more stable, these benefits will only be amplified.

In addition to the ASIC, other stakeholders have warned about the risk of Bitcoin and crypto investments. For instance, Morgan Financial advisor Simon Barnett has advised that the instability in the Bitcoin market is “unlike anything seen on a regulated exchange.” Nonetheless, he stated that anyone interested in investing should seek professional advice.

Adding to Barnett’s cautionary stance is market analyst Megan Stals, who has warned that a “lot of uncertainty” still surrounds cryptocurrencies. Stals believes that the initial response to spot Bitcoin ETFs on the ASX will be slow because Australians already have access to Bitcoin ETFs through foreign exchanges.

While Stals and Barnett have advised caution, others like 123 Financial Group’s senior adviser, Sharon Goodwin, are more removed from cryptocurrencies. Stating that getting advice may be difficult in Australia, Goodwin added that her firm does not discuss digital assets with clients as they are not on the company’s list of approved products. Also, she said only a few of her clients have asked about crypto products, noting that the people who bring it up consider it “play money.” Interestingly, Goodwin said the company will consider including crypto in its approved products list depending on how things pan out.

The first ETF that directly holds BTC in Australia was launched early in the month. The Cboe Australia Exchange approved Monochrome Asset Management’s Monochrome Bitcoin ETF (IBTC) after the company applied in April. Before IBTC, Australian investors could only invest in Bitcoin products indirectly holding BTC. Unfortunately, investors on these platforms are not protected by rules covering directly held crypto assets under the Australian Financial Services Licensing (AFSL) regime.

The approval of multiple spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC) earlier in January seemed to influence other countries’ positions on the products. The SEC has rejected multiple applications since the first one was submitted by Gemini’s Cameron and Tyler Winklevoss in 2013. The Commission repeatedly refused to approve multiple applications from several issuers, citing problems with fraud and market manipulation.

Following a drawn-out legal battle with Grayscale, the SEC allowed ETFs to trade on the traditional market. According to Blockworks ETF Tracker, the total market cap of all spot Bitcoin ETFs in the US market is $77.88 billion as of June 17. Late last month, the SEC also approved 19b-4 filings that will eventually see spot Ether (ETH) ETFs on stock exchanges after the Commission approves S-1 filings.

In April, the Securities and Futures Commission (SFC) of Hong Kong approved multiple spot BTC and ETH ETFs. The progress made so far this year will likely spur regulators in several other countries to consider greenlighting similar products.

In general, Bitcoin acceptance, however gradual, is increasing. According to Samara Cohen, the chief investment officer of ETF and index investments at giant asset manager BlackRock, financial advisors currently wary of Bitcoin will eventually join the adoption journey.

Speaking recently at the Coinbase State of Crypto Summit held in New York City, Cohen said about 80% of Bitcoin ETF purchases have come from “self-directed investors” seeking exposure to Bitcoin through the ETFs, via online brokerage accounts. The BlackRock executive said the skepticism of financial advisors is part of their job as fiduciaries to their clients. She even added that the reluctance makes sense considering Bitcoin’s historical data.

“This is an asset class that has had 90% price volatility at times in history, and their job is really to construct portfolios and do the risk analysis and due diligence. They’re doing that right now.”

Cohen suggested that financial advisors need some time to properly assess the sector. She noted that they have to figure out risk analysis and the type of allocation that agrees with the investor’s risk and liquidity needs. Cohen also added that advisors must figure out what role Bitcoin can play in an investor’s portfolio.

BlackRock’s IBIT ETF is the second-largest spot BTC ETF in the US, with $17.24 billion in assets under management (AUM) as of June 17.

The issues Cohen noted suggest that mass adoption by traditional financial companies and advisors requires a careful assessment of crypto and ETFs. Coinbase’s chief financial officer Alesia Haas also said Bitcoin is “on a slow journey of adoption,” agreeing with Cohen and several other speakers at the conference.

A recent CNBC poll of its Advisor Council sheds better light on the reluctance in the traditional sector. In general, advisors are worried about regulatory compliance and the fact that the ETFs have not been in the market for very long. They also mentioned the high rate of price volatility and crypto’s role in fraud and scandals. Nonetheless, progress on Bitcoin’s adoption journey is expected to cause ripple effects as products like ETFs, financial offers, and even entertainment offerings like crypto gambling bridge the gap between traditional and crypto sectors.

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