Australian Firm Launches In-Kind Bitcoin Spot ETF in Country’s First
Monochrome’s IBTC revolutionizes Australian ETFs. Offering a different product from prior offerings, Monochrome seeks to let two ETF models compete directly.
Monochrome Asset Management, an Australian firm, has launched a new ETF product with an in-kind minting system similar to Hong Kong’s, a first for the nation.
Bitcoin ETFs have been taking the world by storm for the past few months. In addition to the transformative impact that the SEC’s first approval had on Bitcoin’s price, new regulatory acceptance from the United States has led jurisdictions worldwide on a wave of new ETF products. All across the globe, on every continent but Antarctica, more and more countries have been considering their approval, with many interesting new products already launched. It seems that Australia is making a new first in this respect by allowing two radically different types of ETF to co-exist.
First of all, it’s important to do a little housekeeping. Since Monochrome first announced its new ETF product, IBTC, a large amount of coverage has been referring to this product as “Australia’s first ETF.” However, this is not strictly true. Monochrome’s own press release on June 3rd was particularly emphatic on the use of the word "first," but they did avoid directly claiming that IBTC was the nation’s first Bitcoin spot ETF of any sort, a distinction that was unfortunately lost on many Bitcoin enthusiasts worldwide. Instead, the very first products of this nature were actually offered by 21Shares in May 2022, well ahead of the SEC’s approval. A few products in this category have been available for Australians ever since.
So, if this is true, then why has there been so much fuss over Monochrome’s offering? Why is a product like IBTC even being launched if the country has had Bitcoin spot ETFs for much longer than the United States? The answer comes from the fact that this new product is substantially different from the previous ones available. Monochrome’s press release referred to IBTC as “Australia’s first ETF that holds Bitcoin directly," and there is indeed truth in that. Specifically, much in the style of Hong Kong’s new ETF, Monochrome is offering an in-kind model for actually creating new shares.
This means that users are able to directly redeem Bitcoin for IBTC instead of the more common model where the issuers buy gargantuan quantities of Bitcoin themselves. As Monochrome put it themselves, “IBTC is the first and only exchange-traded fund in the market to be authorized under the cryptoasset licensing category. Prior to IBTC, Australian investors were only able to invest in ETFs that indirectly hold bitcoin or through offshore bitcoin products, both of which do not benefit from the investor protection rules under the directly held crypto asset AFS licensing regime.”
Analysts have noted that the IBTC model is notably more fluid than Hong Kong’s ETFs in one important aspect, in that that particular example involves specific authorized participants gaining the ability to make the in-kind redemption. In other words, these specific people serve as intermediaries for the average ETF purchaser, who cannot make the redemptions personally. IBTC’s model differs significantly from this and is apparently willing to accept ordinary customers carrying out this function. Still, despite these differences, there are, of course, a great many similarities. For example, IBTC is trading on the same exchanges as its earlier competitors, with some of these competitors even waiting for approval to use other venues.
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It will be very interesting to see how Monochrome’s IBTC product compares to some of the earlier Bitcoin ETFs in Australia. Although the first day of trading has concluded by this point, the actual statistics of the deals in question remain somewhat elusive. Nevertheless, it’s encouraging that variations like this within one jurisdiction are possible. Hong Kong, the biggest prior example of an in-kind ETF model, has actually been seeing a variety of good news itself. Duncan Chiu, a member of Hong Kong’s Legislative Council, publicly criticized “excessively stringent” licensing regulations for crypto-related businesses, showing that the city’s highest authorities are concerned with ensuring that Hong Kong is an attractive environment for Bitcoin. Chiu went on to say that a wave of withdrawn license applications had “shaken the confidence of market participants in Hong Kong’s push to develop Web3.”
A variety of global firms operating in Hong Kong have indeed rescinded their attempts to get approved by these licensing regulations, and the government has issued warnings that firms must receive approval or cease operations. Nevertheless, the cost of these licenses has actually fallen dramatically in the last year. Additionally, the South China Morning Post, one of the largest and most influential media outlets in Hong Kong, ran a number of sympathetic pieces on the cryptoasset industry in early June. For all the initial difficulties that the in-kind Bitcoin ETFs had in achieving inflows, Bitcoin clearly has a variety of powerful friends in Hong Kong.
Additionally, the wave of ETF approvals has gone beyond Australia in less than a day. Already, Thailand has jumped on the train scant hours later, officially making it the newest country to finally welcome the Bitcoin spot ETF. It’s clear from this that the wave of ETF enthusiasm isn’t going anywhere yet. Bitcoiners worldwide have been eager to devour any news related to the progress of ETFs in any jurisdiction, and sometimes that has led them to make grandiose claims that are not entirely accurate. Nevertheless, the wave of new approvals is very real and gaining traction every day. It’s no wonder that Bitcoiners are so ready to see success around every corner, because their expectations have been exceeded in so many areas.
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