The US Securities and Exchange Commission (SEC) earlier this month released long-awaited guidance detailing how cryptocurrency exchange-traded products (ETP) should disclose risk, custody and valuation in their filings – a move seen as critical for mainstream acceptance.
The SEC has also reduced the expected approval timeline for new digital asset exchange-traded funds (ETF) from up to 240 days to just 75, signalling a faster path to market for providers.
Marc Jocum, investment strategy and research manager at Global X, described the development as “a significant step toward the regulation and approval of broader cryptocurrency-based ETFs”.
“This move underscores the SEC’s recognition of crypto ETFs as a growing part of the mainstream investment landscape,” Jocum said.
“While the SEC hasn’t yet approved some of the new crypto products, it is encouraging issuers to amend and refile applications by the end of July, indicating a willingness to engage constructively.”
The SEC is actively reviewing filings for ETFs tied to Solana, Litecoin, Dogecoin and XRP. Bloomberg Intelligence estimates there’s now a 90 per cent chance that these types of ETFs will be approved in the US by year-end.
In parallel, the SEC recently approved Grayscale’s request to convert its Digital Large Cap Fund – which holds assets including bitcoin, Ethereum, XRP and Solana – into a spot ETF, marking the first approval of a multi-asset digital ETF in the US.
“This momentum – what some are calling the opening of the “crypto floodgates” – has the potential to influence Australian issuers to consider expanding their crypto ETF offerings,” Jocum said.
“Australia has already been ahead of the curve, with Global X launching spot bitcoin and Ethereum ETFs in 2022, well before the US did. This early leadership gives Australia a strong foundation to build upon as global regulatory clarity improves.”
Betashares, which introduced its cryptocurrency-linked equities ETF (CRYP) in 2021, also sees opportunity – but warns investors need to take a long view.
“In many respects, digital assets are best considered a marathon not a sprint,” said Betashares’ head of digital assets, Justin Arzadon.
“Our Crypto Innovators ETF or CRYP launched several years before the availability of cryptocurrency ETFs in both Australia and the United States – and has been well supported by local investors ever since.”
Arzadon said institutional interest remains cautious but is shifting.
“Regulatory clarity in the United States is helping boost confidence for institutions and corporate entities in digital assets,” he said.
“Globally and here in Australia, there is more adoption of digital assets in investor portfolios, but they remain relatively modest. The largest and most sophisticated investors will sit on the sidelines of digital assets until they can satisfy their fiduciary duties – most importantly, being able to interact with the firms they know and trust.”
Over time, Betashares does, however, expect adoption of digital assets in investor portfolios to steadily increase as the use cases of the asset class become clearer, Arzadon said, pointing to overseas progress.
“It’s more likely this clarity will become apparent as regulation, both at home and abroad, gives institutional investors and corporate entities increasing confidence to use digital assets – while the US has made strides on this front, other jurisdictions in Europe, Asia and the Middle East are more advanced,” he said.
“In the meantime, digital assets are best considered as a small allocation in an overall portfolio that otherwise largely contains diversified exposure to equities and bonds.”
For his part, Jocum believes Australia has an opportunity to be a regional leader in regulated digital asset exposure.
“With both the corporate regulator, ASIC, and the local exchanges (ASX and Cboe) supporting crypto ETF launches, the regulatory framework here is already established, and potential to advance further as demand grows,” he said.
According to data from Global X, year-to-date, net flows into cryptocurrency ETFs listed on the ASX topped $250 million.
“We’ve seen strong and growing interest from advisers and investors who see crypto as a legitimate alternative asset class,” he said.
“Over time, I expect to see some demand for more diversified crypto exposure, whether that’s through ETFs tracking other digital assets like Solana, Litecoin or Ripple, or innovative wrappers that incorporate staking, options overlays or multi-asset strategies.”
Asked whether Global X plans to expand its remit beyond bitcoin and Ethereum ETFs, Jocum said: “We’re always evaluating opportunities to bring relevant and differentiated products to Australian investors.
“As the first issuer in Asia-Pacific to launch spot bitcoin and Ethereum ETFs, Global X has been at the forefront of this space.”
He added: “Overall, each step toward regulatory clarity reinforces confidence in digital assets as a legitimate investment class, and the introduction and approval of ETFs serve as a powerful stamp of approval for investor confidence.”
