A bitcoin ETF’s road to ASX approval

2008: The beginning

Bitcoin was created in 2008 after the financial crisis by an unknown person, or group of people, using the pseudonym Satoshi Nakamoto. The original intention was to develop a type of money that people could instantly send to each other over the internet, without going through a bank or any other third party. The intention was to make it cheaper and quicker to transact. This was accomplished through blockchain technology. 

Initially, it was thought that the public and transparent nature of the transaction history on the blockchain would make it unfriendly for those who wanted to hide or disguise transactions. However, as it operated outside of any jurisdiction, its early years were synonymous with scandals, theft and bitcoin-related-exchange collapses.

The asset class, however, was gaining a legitimate following and increased use. Other digital currencies started to emerge. Some legitimate, some not so much. As the scandals and instances highlighting the lack of investor protection, always well covered in the press, grew there were attempts to ban digital assets such as bitcoin in certain countries. 

Regulators and government oversight

Generally, regulators and governments slowly started to recognise that bitcoin and digital assets represented a technological innovation that could disrupt the current financial system, and potentially have longevity. This created the need for effective regulation to protect investors and markets. Digital assets were already subject to anti-money laundering regulations, so as prosecutions started, criminal activity slowed.

At the same time, investor interest and adoption increased and the infrastructure supporting the bitcoin network evolved. However, despite the progress, the digital assets frontier was still vulnerable to corporate failures and illegal activity. The difference was that policymakers who had assessed and adapted their existing financial regulatory frameworks could now oversee and pursue those they thought were committing crimes while transacting using digital assets. Now there is some protection for market participants, and officials pursue those who conduct illegal activity while using digital asset trading platforms and cryptocurrencies.

A recent example is the high-profile case of FTX’s Sam Bankman-Fried who failed to provide adequate custody (and stole) from clients who used his exchange. Other high-profile cases include binance’s Changpeng Zhao who did not maintain an effective anti-money laundering program, as well as the money laundering against a New York couple that allegedly stole 119,754 bitcoin from Bitfinex’s platform and the conviction of Jimmy Zhong, who was convicted for stealing 51,680 bitcoin.

For many investors, corporate scandals and security were not the only problems. Setting up an account for digital assets and trading was becoming more and more difficult (and potentially more costly).

2017 – The push for bitcoin ETFs

Recognising that investors may need professional help to navigate the complex world of cryptocurrencies, VanEck determined that ETFs could be an ideal vehicle for investors to access this asset class. Importantly, as they are managed funds, bitcoin ETFs are subject to the same regulatory oversight as other ETFs.

In 2017 VanEck was the first ETF issuer to file for a bitcoin futures ETF with the US Securities and Exchange Commission (SEC).

While the US wasn’t yet ready for a bitcoin ETF, European regulators were moving forward and in November 2020 VanEck successfully launched its bitcoin ETN¹on exchanges in Europe. As an aside, the European Union will become the first major jurisdiction with a comprehensive crypto framework, the Markets in Cryptoassets (MiCA) licensing regime, when it takes effect at the end of the year.

2021 – ASIC releases guidance

In late 2021 the Australian Securities and Regulatory Commission (ASIC) released guidance, following industry consultation, for product issuers and market operators on how they can meet their regulatory obligations relating to crypto-asset exchange traded products (ETPs) and other investment products. In response, VanEck started working with the ASX to bring a bitcoin ETF to Australia’s primary exchange.

ASIC is one of many regulators that have been keen to learn more about the threats and opportunities crypto assets may bring to our domestic financial system. They have responded to ensure market integrity and consumer protection where they can.

With more regulatory oversight and better infrastructure, bitcoin trading has improved to better meet the needs of institutions. Custody, transparency, and security are more developed than when digital currencies first emerged.

2023 – The door opens for US listed bitcoin ETFs

In terms of bitcoin ETFs, the tipping point was in the US, in October 2023, when the D.C. Circuit Court of Appeals handed down a decision against the SEC that effectively ordered the agency to scrap its rejection of spot bitcoin ETFs.

As a result of the ruling the SEC allowed, for the first time, spot bitcoin ETFs to be listed in the US earlier this year. VanEck was among the first investment managers that launched a bitcoin ETF in the US in January 2024.

Other jurisdictions soon followed.

2024 – ASX approval

After working with the ASX since ASIC released its guidance in 2021, VanEck’s bitcoin ETF was approved in June 2024. The ASX is Australia’s primary market destination. The crypto framework for admission is far more stringent than its peers.

In bringing the first cryptocurrency ETF to market via the ASX, we had to meet ASX’s rigorous admission process, including meeting the high standards of ASX’s crypto framework and in accordance with ASIC’s guidance.  

VBTC, which started trading last week, was the first, and so far, only bitcoin ETF admitted for trading on the ASX.

It has been a long journey, but we think one that gives Australian investors access to the bitcoin opportunity.

Key risks: An investment in VBTC involves extremely high risk and the potential for loss of all capital invested. Investors should actively monitor their investment as frequently as daily to ensure it continues to meet their investment objectives. Risks associated with an invest in the fund include those associated with pricing risk, regulatory risk, custody risk, immutability risk, ASX trading time risk, concentration risk, environmental risk, currency risk, operational risk, underlying fund risk and forking risk. See the VanEck Bitcoin ETF PDS and TMD for details.