Australia Launches First Direct Bitcoin ETF

Australia’s first direct Bitcoin exchange-traded fund (ETF) is set to open for trading at the beginning of this week. The Monochrome Bitcoin ETF (IBTC) will start its journey on the Cboe Australia exchange on Tuesday, June 4. This ETF is noteworthy for directly holding Bitcoin, a significant first for the country under new cryptocurrency asset licensing rules passed in 2021. Monochrome Asset Management has obtained approval under this new framework, allowing it to maintain direct Bitcoin holdings.

Previously, Australian investors could only access Bitcoin exposure through exchange-traded products that either indirectly held Bitcoin or via offshore products. These options did not benefit from Australia’s investor protection guidelines under its directly-held crypto asset licensing regime. In contrast, Monochrome has assured that IBTC’s Bitcoin holdings are securely stored offline, using an institutional-grade custody solution that adheres to Australian regulations.

Monochrome CEO Jeff Yew has forecasted robust interest in this new ETF, noting the significant rise in indirect Bitcoin ETF products over recent months. According to Yew, the availability of a direct Bitcoin ETF will open new doors for Australian investors, outperforming the limitations posed by offshore and indirect products. Yew confirmed that Monochrome is also preparing to launch an Ether (ETH) ETF, which will similarly hold the asset directly. The company is exploring additional thematic opportunities within the digital asset sector to meet growing investor demand.

It is also interesting to note that this ETF differs from its U.S. counterparts. Unlike them, which focus on cash-created products, Monochrome’s ETF allows for in-kind redemptions from investors. This unique feature may further attract a significant inflow of investments as the ETF goes live.

The introduction of IBTC in Australia follows closely on the heels of four spot Bitcoin ETFs launched in Hong Kong on April 30. Only one of these Hong Kong ETFs, Bosera’s spot Bitcoin ETF, has enjoyed cumulative net inflows. In contrast, U.S. Bitcoin ETFs have generally seen better performance, with significant inflows offset by some outflows from products like the Grayscale Bitcoin Trust.

Jeff Yew views Australia’s crypto market as highly active and predicts that local spot Bitcoin ETFs could generate between $3 billion to $4 billion in net inflows over the next three years. This optimistic outlook suggests a promising future for direct Bitcoin investment options in the country, potentially transforming Australia’s cryptocurrency investment landscape.

The launch of the Monochrome Bitcoin ETF marks a pivotal moment in Australia’s financial markets. By offering direct Bitcoin exposure under robust regulatory conditions, it could pave the way for a range of new investment opportunities in the burgeoning digital asset sector. This move also aligns Australia more closely with global trends, following similar launches in other financial hubs like Hong Kong.

In the broader context, Monochrome’s initiative reflects a growing acceptance and integration of cryptocurrency assets within traditional financial ecosystems. As more investors look towards digital assets for diversification and growth, products like the Monochrome Bitcoin ETF could become standard components of investment portfolios. The future of cryptocurrency in Australia thus appears even more interconnected with mainstream financial strategies, steering the country towards a new era of digital finance.