Holon Investments announced on Monday that it may not be able to continue operating the three unlisted funds invested in bitcoin, ethereum and filecoin that he launched in July, after the Australian Securities and Investments Commission imposed a stop loss order on him. The regulator has listed cryptocurrencies as a top enforcement priority for the coming year.
And last week, Global X’s main rival in the local market, Cosmos Asset Management, said it withdraw crypto ETFs from the Cboe Australia stock exchange. Cosmos declined to comment on the reasons for the withdrawal, except to say safeguards were in place to ensure investors’ money was protected.
Sources close to Cosmos have suggested that the company has failed to attract enough assets under management to remain viable, given the specific costs of crypto custody and professional liability insurance arrangements.
Cosmos’ Bitcoin and Ethereum funds had around $1.6 million in combined assets, while Global X’s funds had around $8.4 million under management, as of last public disclosure in September.
Global X (then ETF Securities) and Cosmos made history by launching the first Australian exchange-listed funds invested in crypto assets, providing regulated exposure to a controversial and unregulated market.
Their listing in May followed a multi-year regulatory approval process and extensive marketing campaign, but coincided with the collapse of algorithmic stablecoin Terrawhich sparked a sell-off in crypto markets and shook confidence in the fledgling industry.
Metcalf said insurance and other crypto ETF management costs were “not a challenge” for Global X. But he admitted the funds had had a “relatively quiet” reception from investors, amid the market downturn known as the second crypto. Winter.
The reluctance of many local brokers to provide clients with access to funds – despite being ASIC-regulated and listed on Cboe – remained a barrier to fund flows, he added.
“It’s an area that limits potential opportunities,” he said. “I think it’s just people learning about cryptocurrencies as an asset class, and there are additional costs associated with trading crypto on the exchange from a broker’s perspective.”
ASX Clear, the national clearing authority, requires market participants to margin crypto ETF trades at a cost of 42% of the trade value. Kanish Chugh, CEO of Global X describes the requirement as “prohibitively expensive” at the time. The Financial analysis also reported that compliance offers from some brokerage firms were stalling trades due to regulatory concerns.
Mr Metcalf said he expects flows to increase in Global X’s Australian crypto ETFs if and when the underlying prices of bitcoin and ethereum (which are each down around 50% since the beginning of the year) were improving.
“We think there is a lot to do and another cycle ahead, in terms of adopting blockchain technology innovation,” he said.
“When investors are ready, when the time is right, [our funds are] sitting on the shelf and there to satisfy that appetite.
ETF Securities chairman and former Rich Lister Graham Tuckwell announced he was selling the Australian business earlier this year to focus on his family’s philanthropic pursuits. The company launched the world’s first gold ETF in 2003.
Mr. Tuckwell told the Financial analysis he hoped the new owners would retain the ETF Securities brand after completion.
Asked to respond, Mr Metcalf said:
“We took a very thoughtful approach to whether we were going to rebrand the business. It was about what we built against this huge world power that we can capitalize on. And we’ve decided that the benefits are more in favor of the Global X side of that equation.