Global X commits to crypto ETFs as rivals quit

Holon Investments announced on Monday that it may not be able to continue operating the three unlisted funds invested in bitcoin, ethereum and filecoin it launched in July, after the Australian Securities and Investments Commission issued a stop order on it. The regulator has listed cryptocurrencies as a top enforcement priority for the coming year.

And last week, Global X’s primary rival in the local market, Cosmos Asset Management, said it would delist its crypto ETFs from the Cboe Australia exchange. Cosmos declined to comment on the reasons for the withdrawal, other than to say that the safeguards were in place to safeguard investors’ money.

Sources close to Cosmos suggested that the firm has not been able to attract sufficient assets under management to remain viable, given the specific costs of crypto custody and professional indemnity insurance schemes.

Cosmos’ bitcoin and ethereum funds had about $1.6 million in assets combined, while Global X’s fund had about $8.4 million under management, as of last disclosed in September.

Global X (then ETF Securities) and Cosmos made history by launching Australia’s first exchange-traded fund invested in crypto-assets, providing regulated exposure to a controversial and unregulated market.

‘Relatively quiet’

Their IPO in May followed a multi-year regulatory approval process and high-profile marketing campaign, but coincided with the collapse of algorithmic stablecoin Terra, which triggered a widespread sell-off in crypto markets and shook confidence in the nascent sector.

Metcalf said the insurance and other costs of running the crypto ETFs “didn’t present a challenge” for Global X. But he admitted the funds had experienced a “relatively quiet” reception from investors amid the market downturn known as the second crypto. winter.

The unwillingness of many local stockbrokers to give client access to the funds – despite being regulated by ASIC and listed on Cboe – remained a roadblock to cash flows, he added.

“It’s an area that limits the potential opportunity,” he said. “I think it’s just people getting comfortable with cryptocurrencies as an asset class, and there are some additional costs associated with trading crypto on an exchange from a brokerage standpoint.”

ASX Clear, the national clearing authority, requires market participants to post a margin on trading crypto ETFs at a rate of 42 percent of the value of the transaction. Global X CEO Kanish Chugh described the claim as “prohibitively expensive” at the time. The Economic review also reported that compliance offerings from some brokerage firms blocked trading due to regulatory concerns.

Metcalf said he expected flows to pick up in Global X’s Australian crypto ETFs if and when the underlying prices of bitcoin and ethereum (each down about 50 percent so far this year) improve.

“We think there is a lot of riding and a new cycle coming, in terms of innovation adoption of blockchain technology,” he said.

“When investors are ready, when the time is right, [our funds are] sitting on the shelf and there to meet 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 activities. The firm launched the world’s first gold ETF in 2003.

Mr Tuckwell told Economic review 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 should rebrand the business. It was a case of what we built versus this huge global powerhouse that we can leverage. And we decided that the benefits are more in favor of the Global X side of that equation.”