Last-minute delay for ETF Securities cryptocurrency pioneers

Two ETF Securities cryptocurrency products – which were intended to be the first funds offering investors direct exposure to bitcoin and ethereum – are likely to be delayed.

There has been intense competition among ETF providers to become the first to list products allowing direct investments in the cryptocurrencies without needing a digital wallet. Picture: Getty Images

Two ETF Securities cryptocurrency products – which were intended to be the first funds offering investors direct exposure to bitcoin and ethereum – are likely to be delayed, just days before they were due to list on the Cboe Exchange.

There has been intense competition among ETF providers to become the first to list products allowing direct investments in the cryptocurrencies without needing a digital wallet, with Cosmos also set to list a product this week.

ETF Securities was scheduled to list two – the 21Shares Bitcoin ETF and the 21Shares Ethereum ETF – on Cboe, previously known as Chi-X, on Wednesday.

But the company confirmed on Sunday that infrastructure issues could mean a temporary delay to the listing plans.

“We have become aware late on Friday that a downstream service provider may not be fully ready to support the launch of the bitcoin and ethereum ETFs,” ETF Securities head of product Evan Metcalf told The Australian.

“The party involved is remote to both ETF Securities and the exchange, but we are assured that work is being done over the long weekend to ensure readiness as soon as possible … This may cause a temporary delay in these products coming to market.”

While there are cryptocurrency-related ETF products on the market – including BetaShares Crypto Innovators, which provides exposure to companies providing other services to the sector – there are no listed funds allowing direct exposure to the underlying currencies.

It is expected that more than $1bn could flow into the first bitcoin ETFs in Australia.

Cosmos Asset Management’s bitcoin ETF is also expected to begin trading on April 27 after being given the green light from monopoly clearing services provider ASX Clear.

VanEck Australia, BetaShares and several other ETF providers are also working on similar cryptocurrency products.

On Sunday, ETF Securities’ Mr Metcalf said the company would know “more on this (delay) over the coming days”.

“While we are disappointed with this setback, we remain on track to launch Australia’s first bitcoin and ethereum ETFs as quickly as possible,” he said.

ETF Securities chairman Graham Tuckwell has previously expressed his unhappiness at the slow pace of approvals from ASX Clear, and warned there would be slower uptake by investors than for other funds because the infrastructure was still not in place.

“Although we are launching next Wednesday, its almost with one hand tied behind participants’ backs and there will be a number of people who will either not be ready or are not happy about some of the requirements, so it won’t be the full-blown show you’d expect if it was a stock standard product,” Mr Tuckwell said last week.

A Cboe spokesman declined to comment on Sunday.

In the US, the Securities and Exchange Commission has declined every spot bitcoin ETF application made.

Grayscale Investments, a US asset manager with a $US40bn ($55bn) bitcoin trust – the world’s largest cryptocurrency investment vehicle – last week made a fresh application to gain SEC approval to covert it into an ETF.

The SEC’s main concern about the cryptocurrency ETFs – which match shareholdings to the spot price of the currency – is centred on the unregulated nature of the platforms where they trade, which makes surveillance difficult.

All bitcoin held by the ETF Securities fund will be held in a secured account owned by Coinbase, which has over $US270bn ($365bn) in assets under custody. They will be held on both “cold storage” accounts – one that is taken offline to reduce the possibility of hacking – and “multi signature wallet” accounts, according to the filing.

The prospectus for the ETF Securities products also warns there is the possibility of changes to regulations that may affect the performance of cryptocurrencies.

The Australian Securities & Investments Commission gave a green light to the trading and listing of cryptocurrency-linked ETFs in October.

Originally published as Last-minute delay for ETF Securities cryptocurrency pioneers