One of Australia’s largest crypto exchange managers predicts Australian markets could expect to see a flood of institutional investment in crypto assets as soon as next year, once the first Bitcoin ETF is listed, and regulatory clarity is legislated.
Lasanka Perera, chief operating officer at crypto exchange Independent Reserve, told Business Insider Australia he expects listed companies finding it difficult to get a high yield on the cash they have to hand to be among the first to jump at the opportunity.
“There’s already a universe of mid-market companies and family offices that are deploying capital [into crypto] right now,” Perera said. “But you’ll get to see much larger companies that are deploying capital into crypto assets, using that to generate yields and capital gains.”
It’s a trend that has already seen billions of dollars worth of investment in Singapore, where regulators have been quick to embrace crypto assets. Perera said Independent Reserve had only been operating in the market for a year before fund managers and large listed companies were trying to “knock our doors down”.
“I think it’s to do with how the regulator has set out a clear regulatory framework there, and they’re clearly a leader in the space and, actually, globally,” Perera said.
“So investors look at it, and they’re comfortable that they’re looking at a regulated player, that they are a business that has very good governance and proper operational controls. In Australia, we’re less developed.”
A recent report handed down by a Senate committee last week proposed a new government-backed licensing regime for digital currency exchanges mimicking the work of Singaporean regulators.
If legislated, Perera said, it would be a boon for institutional investors in Australia, and could prompt an uptick in investment earlier than some might think. The possible introduction of a bitcoin ETF “changes things around” and could bring it forward even sooner.
After months of industry consultation, ASIC on Friday gave bitcoin and Ethereum ETFs a tentative green light, opening the door for them to be traded on Australian exchanges.
“We recognise the interest in, and demand for, ETPs and other investment products that hold crypto-assets in Australia,” ASIC wrote in a statement on Friday.
“However, we are also aware of the real risk of harm to consumers and markets if these products are not developed and operated properly.”
The announcement came just hours after Business Insider Australia reported that Australian fund manager BetaShares will list an exchange-traded fund made up of a round of crypto ventures on the Australian Securities Exchange (ASX) on Thursday, amid a whirlwind of fund launches geared towards giving investors exposure to crypto assets via global exchanges.
A spokesperson for the ASX told Business Insider Australia the regulator’s response was a “positive development” for the space, and that the exchange has since fielded various applications from issuers looking to launch their own crypto ETFs, or “ETPs”.
“We have been working with a range of issuers interested in launching ETPs that invest in crypto-assets and are very aware of the high level of interest amongst investors for products that provide access to these assets,” a spokesperson for the ASX said.
“Following ASIC’s release, the ASX will assess the modifications necessary to the ASX AQUA rules that support the ETP market, as well as those that might be required to other systems, processes and compliance functions that ensure ASX maintains a fair, orderly and transparent market.”
According to reports, a range of funds have already started work on bids of their own. It’s understood by Business Insider Australia that BetaShares is working to list a Bitcoin ETF later this year, while innovation-focused fund manager Holon is also reported to be a contender.
Perera said the fund to get Australia’s first ETP over the line could trigger a wave of institutional investment, even though there’s plenty of perceived resistance from major investors. He said he would love to see superannuation funds among the earliest adopters.
“There is huge resistance, but I think it’ll happen sooner rather than later,” he said.
“So, it might seem to us like it may take five or 10 years for super funds to allow their investors to get crypto exposure,” he said. “But I think if one goes, then all of a sudden you see a few others get into it.”
The exchange said that while large companies in Australia may be hesitant, low-level institutional investment has seen marked growth over the last year.
According to Independent Reserve, SMSFs alone have already traded $557 million through the 2021 calendar year, up 355% from the year before. The platform said that financial advisers have also recorded a noteworthy uptick in investment, and smaller businesses, too, are turning to crypto exposure for higher yields.