ETF

Bitcoin paints Nasdaq green as NCI index marks 38% gain in January

The bullish rise of Bitcoin and other altcoins in January helped the Nasdaq Crypto Index to register its third-highest monthly gain.

Bitcoin’s (BTC) bullish surge in January has helped the Nasdaq Crypto Index to register its third-highest monthly gain, with a 38% surge. The cryptocurrency market started the year bullish, defying major bearish market outlooks. Bitcoin and a number of altcoins touched new multi-month highs as inflation cooled off.

*Nasdaq Crypto Index monthly price chart Source: Google*

The Nasdaq Crypto Index (NCI) recorded its third-biggest monthly gain since its inception in February 2021. The crypto asset index was launched by Brazilian asset manager Hashdex in partnership with the Nasdaq stock exchange. The index consists of eight cryptocurrencies: Bitcoin, Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC), Chainlink (LINK), and Stellar (XLM), among a few others.

BTC has the highest weight in the index (69.8%), followed by ETH (27.08%). The other altcoins have a weight of less than 1%. Thus, the subsequent rise of BTC and ETH, which have surged over 35% in the past month, is also reflected in the index. The index weight refers to the share of stocks invested in a particular digital asset.

With a prolonged crypto winter throughout 2022, Bitcoin ended the year at around $16,500, with most altcoins also testing their yearly lows. Many market pundits had warned that the bearish sentiment might continue into the new year owing to the FTX saga unfolding daily. However, the crypto market showed resilience and started the year on a bullish note, registering a double-digit gain for the past month.

On Feb. 1, the Federal Open Market Committee press briefing announced an interest rate hike of 25 basis points. The United States Federal Reserve Chair, Jerome Powell, suggested that inflation has started to cool off in the world’s largest economy. The Fed raise worked wonders for the crypto market, with BTC briefly touching $24,000 and the crypto market cap rising by 4%.

Osprey sues Grayscale for misrepresenting likelihood of GBTC ETF approval

Osprey alleges its only competitor on the BTC OTC trust asset market gained its 99.5% market share by misrepresenting the likelihood of its trust becoming an ETF.

Digital asset manager Osprey Funds filed suit against Grayscale Investments in Connecticut Superior Court on Jan. 30, alleging violations of the state’s Unfair Trade Practices Act. The suit concerns Grayscale advertising and promotion of the Bitcoin (BTC) exchange-traded fund (ETF) it is seeking to create.

Osprey stated in the suit that it is the only competitor to Grayscale on the over-the-counter traded Bitcoin trust asset management market, and thatGrayscale maintained its leading position through deceit:

“Only because of its false and misleading advertising and promotion has Grayscale been able to maintain to date approximately 99.5% market share in a two-participant market despite charging more than four times the asset management fee that Osprey charges for its services.”

Specifically, Osprey alleged that Grayscale promoted participation in its Grayscale Bitcoin Trust (GBTC) as a means of accessing a spot-based Bitcoin ETF through the conversion of its $12-billion GBTC. Grayscale presented the conversion as “a foregone conclusion, when it knew that access was never likely to happen,” according to the suit.

Osprey alleged that Grayscale continued to call the conversion “‘likely,’ despite knowing that such a description was false, as the SEC had consistently rejected the possibility of such conversion for a Bitcoin commodity fund since in or before late 2020.” Osprey claimed that statements in emails, press releases and on Twitter, as well as Grayscale executives’ television appearances, contained the false information.

Dear @BarrySilbert, I have an idea for $GBTC. Give me a buzz when you’re ready. We’re just up the road from you in Connecticut. pic.twitter.com/zVFHBLxSl0

— Greg King, CFA (@GregKingOsprey) January 13, 2023

The United States Securities and Exchange Commission officially denied Grayscale’s application to convert its GBTC into an ETF on June 29. Grayscale filed a petition for review in the District of Columbia Court of Appeals thatsame day. The court is expected to hear oral arguments in the case on March 7.

Grayscale is part of Digital Currency Group, which also owns Genesis Global Capital, the crypto lender that declared bankruptcy on Jan. 19. Osprey has also seen hard times recently. It has reportedly laid off 15 staff members since last summer, leaving it with a staff of less than 10. Osprey is seeking an award for damages from Grayscale and injunctive relief.

Grayscale did not immediately return an email seeking comment.

Updated Jan. 31 at 2.19am UTC to note that Cointelegraph has reached out to Grayscale.

British authorities split on banning sale of crypto investment products

Policymakers in the United Kingdom are divided on whether the sale, marketing and distribution of derivatives and exchange-traded notes, tied with crypto, should be banned.

The policy decision-makers in the United Kingdom are divided on whether the sale, marketing, and distribution of derivatives and exchange-traded notes (ETNs) tied with cryptocurrencies should be prohibited when it comes to retail investors. The Regulatory Policy Committee believes the measure, adopted in 2021, is unjustified under the current circumstances.

The chief British regulator, the Financial Conduct Authority (FCA), imposed the prohibition in January 2021. Since then, companies can no longer offer cryptocurrency derivatives products such as futures, options and exchange-traded notes, or ETNs, to retail customers.

The blanket ban was imposed despite 97% of respondents to the FCA’s consultation opposing the “disproportionate” prohibition, with many arguing that retail investors are capable of assessing the risks and the value of crypto derivatives.

On Jan. 23, the Regulatory Policy Committee (RPC) — an advisory public body sponsored by the government’s Department for Business, Energy and Industrial Strategy — laid out its reasons against FCA’s prohibition.

Using the cost-benefit analysis, the RPC evaluated annual losses from the measure at roughly 268.5 million British pounds ($333 million). As the RPC states, the FCA didn’t provide a clear explanation of what specifically would happen in the absence of the prohibition. It also didn’t explain the methodology and calculations to estimate the costs and benefits back at the time. On that basis, the RPC rates the prohibition at the “red” level, which means it is not fit for purpose,.

The negative review by RPC doesn’t necessarily lead to the direct reversal of legislation. However, given the committee’s ties to the Department for Business, Energy and Industrial Strategy, it may mark the different understanding of the reasonable regulation by the FCA and the government.

Last year the British financial authorities made a number of significant efforts to foster the development of the digital industry. For example, “designated crypto assets” were included in a list of investment transactions that qualify for the Investment Manager Exemption.

Samsung investment arm to launch Bitcoin Futures ETF amid rising crypto interest

Hong Kong investors can now gain exposure to Bitcoin through Samsung’s new ETF listing, launching on Jan. 13.

In Hong Kong, the bell rings for Bitcoin (BTC). Samsung Asset Management Hong Kong (SAMHK), a subsidiary of Samsung’s investment arm Samsung Asset Management, is set to list the “Samsung Bitcoin Futures Active ETF” on the Hong Kong stock market on Jan. 13.

The move comes amid a surge in interest from both the government and institutional investors in the region.

The Hong Kong Stock Exchange. Source: thetradenews.com

The ETF, or exchange-traded fund, will track the spot price of Bitcoin by investing in Bitcoin futures products listed on the Chicago Mercantile Exchange (CME). The ETF will primarily invest in the CME Bitcoin Futures, with some investments in the CME Micro-Bitcoin Futures.

Currently, Hong Kong is the only market in Asia where Bitcoin futures ETFs can be traded. The Samsung Bitcoin Futures ETF joins the Hong Kong Crypto Futures ETF, which began trading to the tune of $70 million in 2022. Other markets worldwide include Canada, the U.S., Australia, and some European countries such as Switzerland.

Park Seong-jin, head of Samsung Asset Management Hong Kong, commented:

“Hong Kong is the only market in Asia where Bitcoin futures ETFs are listed and traded in the institutional market. It will be a new option for investors who are interested in Bitcoin as a competitive product that reflects their experience in risk management.”

This ETF listing will provide retail and institutional investors with a new way to gain exposure to Bitcoin, which may help to attract more mainstream investors to the cryptocurrency space. With Samsung’s reputation and brand power, the ETF could be an attractive option for investors who are looking for a way to invest in Bitcoin without buying and holding their own private keys directly.

The move by Samsung comes as the price of Bitcoin surpassed the $18,000 level, indicating a potential rise in positive sentiment among traders. Other cryptocurrencies have also followed suit, recording a recovery in the broader crypto market.

In 2022, Samsung Asset Management Hong Kong Limited held $1.4 bn assets under management, while the globally recognized brand of Samsung continues to be actively involved in the crypto space. The South Korean company, valued at over $300 billion, boasts a blockchain wallet while the flagship smartphone, Galaxy S22 comes with a preinstalled crypto.

The ETF is a further indication that the global brand is looking to capitalize on the growing interest in cryptocurrencies.

Two crypto-related ETFs were the worst-performing in Australia for 2022

ETFs tracking crypto companies have seen significant drawdowns over the year as a result of major macroeconomic headwinds.

Cryptocurrency-related exchange-traded funds (ETFs) have taken the two top spots for the worst-performing ETFs in Australia for the year, with the same story playing out in the United States.

BetaShares Crypto Innovators ETF (CRYP) and Cosmos Global Digital Miners Access ETF (DIGA) have provided investors Down Under with respective negative returns of nearly 82% and 72% year to date (YTD) throughDec. 30.

BetaShares launched its ETF on the Australian Securities Exchange (ASX) in October 2021, mere weeks before most cryptocurrencies hit all-time highs that they’re yet to regain.

*CRYP was down slightly over 81.8% YTD at the time of writing. Image: Google* *Finance*

CRYP provides exposure to publicly listed blockchain and crypto companies such as Coinbase and mining company Riot Blockchain, among others. The largest current holding at 12.3% of its portfolio is Mike Novogratz’s investment firm Galaxy Digital.

Cosmos’ DIGA ETF tracked the performance of a portfolio of companies focused on mining Bitcoin (BTC) or other cryptocurrencies through the Global Digital Miners Index.

DIGA was similarly listed at a poor time in October 2021 on the Cboe Australia exchange.

Only a year later Cosmos requested the ETF, along with two others tracking BTC and Ether (ETH), to be delisted from Cboe as declining interest in crypto saw the funds’ net asset value dip below $1 million.

U.S.-based ETFs have seen a similar pattern, with the top four worst-performing ETFs being crypto-related, according to ETF.com data. This however excludes inverse and leveraged funds.

The worst performer was the Viridi Bitcoin Miners ETF (RIGZ), which aims to provide exposure to publicly listed crypto miners such as Riot and CleanSpark. It provided investors with a negative 87% return YTD.

*RIGZ has dropped just over 87% for the year. Image: Google* *Finance*

VanEck Digital Transformation ETF (DAPP), the Bitwise Crypto Industry Innovators ETF (BITQ) and the First Trust SkyBridge Crypto Industry and Digital Economy ETF (CRPT) followed closely behind. All tracked the crypto industry through holdings in crypto firms such as Jack Dorsey’s Block Inc., Coinbase, Riot, Galaxy and others.

DAPP and BITQ gave investors a YTD negative return of nearly 86% and 84.5% respectively while CRPT was down nearly 81.5% over the same time.

However, the losses this year haven’t been limited to the crypto industry alone. Over the past year, U.S. bonds, stocks and even real estate have recorded their worst-performing year in decades, and in some cases, centuries.

A traditional portfolio consisting of a respective 60/40 mix of stocks and bonds has seen the worst performance since the middle of the Great Depression in 1932.

MAMAA stocks, the collective name for Big Tech players Meta, Apple, Microsoft, Amazon and Alphabet (Google) have seen share price falls of up to 70% over the year. Meanwhile, the cryptocurrency market cap fell around 64.5% over the year.

Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

The first and the last major attempt to encourage a comprehensive crypto framework was buried in the House of Commons on Nov. 23.

In October, Toronto-based Coinsquare became the first crypto trading business to get dealer registration from the Investment Industry Regulatory Organization of Canada (IIROC). That means a lot as now Coinsquare investors’ funds enjoy the security of the Canadian Investment Protection Fund in the event of insolvency, while the exchange is required to report its financial standing regularly.

This news reminds us about the peculiarities of Canadian regulation of crypto. While the country still holds a rather tight process of licensing the virtual asset providers, it outpaces the neighboring United States in its experiments with crypto exchange-traded funds (ETFs), pension funds’ investments and central bank digital currency (CBDC) efforts.

An era of restricted dealers

Coinsquare, which happens to be Canada’s longest-operating crypto asset trading platform, benefits from its new legal status as none of its competitors can currently boast the same legal footing. By publishing time, all other local players must have the status of a “restricted dealer,” signaling that they’ve made their registration bid and now await IIROC’s decision.

The Guidance for Crypto-Asset Trading Platforms was introduced by IIROC and the Canadian Securities Administrators (CSA) in 2021. It requires crypto businesses dealing with security tokens or crypto contracts to register as “investment dealers” or “regulated marketplaces.”

All local companies have been given a two-year transitory period, during which they should start the registration process and, in some cases, obtain the “restricted dealer” temporary registration.

The list of “restricted dealers” that have been granted a two-year relief period to operate amid the ongoing registration process is rather short and includes mainly local companies, such as Coinberry, BitBuy, Netcoins, Virgo CX and others. These companies still enjoy a right to facilitate buying, selling and holding of crypto assets, but what lies ahead of them is the stringent compliance procedure necessary to continue their operations after 2023. For example, Coinsquare had to obtain an insurance policy that includes an endorsement of losses of crypto assets and fund a trust account maintained at a Canadian bank.

The prosecutors have been watching closely for any non-compliance. In June 2022, the Ontario Securities Commission (OSC) issued financial penalties against Bybit and KuCoin, claiming violation of securities laws and operating unregistered crypto asset trading platforms. It obtained orders banning KuCoin from participating in the province’s capital markets and fining the exchange for more than $1.6 million.

The land of experiments

At the same time, there are adoption cases in Canada that sound radical to the United States. For example, there are dozens of crypto ETFs to invest in the country, while Grayscale still has to lead the court battle with the U.S. Securities and Exchange Commission (SEC) for a right to launch its first ETF.

The world’s first Bitcoin (BTC) ETF for individual investors was approved by the OSC for Purpose Investments back in 2021. Purpose Bitcoin ETF accumulates around 23,434 BTC, which is actually a prominent symptom of the bear market. In May 2022, it held around 41,620 BTC. The major outflow from the Purpose Bitcoin ETF occurred in June, when about 24,510 BTC, or around 51% of its asset under management, were withdrawn by investors in a single week.

Recent: FTX’s collapse could change crypto industry governance standards for good

Another breakthrough in Canadian crypto adoption erupted when the country’s largest pension funds started to invest in digital assets. In 2021, the Caisse de Depot et Placement du Québec — one of the largest pension funds in the French-speaking province of Quebec — invested $150 million into Celsius Network.

The same month, the Ontario Teachers’ Pension Plan announced its $95-million investment in FTX. Unfortunately, this news didn’t age well as both companies have since collapsed and both pension funds had to write off their investments. Perhaps, in that light, the U.S. Department of Labor’s warning to employers against using pension funds that include Bitcoin or other cryptocurrencies now seems like a prudent precaution.

Due to its cold climate, cheap electric supply and light regulation, Canada is among the world’s leading destinations for crypto mining. In May 2022, it accounted for 6.5% of the global BTC hash rate. However, this fall, the firm managing electricity across the Canadian province of Quebec, Hydro-Québec, requested the government to release the company from its obligation to power crypto miners in the province. As the reasoning goes, electricity demand in Québec is expected to grow to the point that powering crypto will put pressure on the energy supplier.

The development of the CBDC is another direction where Canada has been moving faster than its neighbor to the south. In March 2022, the Bank of Canada launched a 12-month research project focused on the design of the Canadian digital dollar in collaboration with the Massachusetts Institute of Technology.

In October, the Bank of Canada published a research report and proposed several particular archetypes of CBDC as useful for organizing “the possible CBDC designs.” While back in March, there was “no decision made on whether to introduce a CBDC in Canada,” the country’s recent budget amendment contains a small section on “Addressing the Digitalization of Money.” In the statement, the government said consultations with stakeholders on digital currencies, stablecoins and CBDCs are being launched on Nov. 3, although exactly which stakeholders will be engaged remains unclear.

The partisan divide

The discussion of what could have become Canada’s formal legal framework for crypto — bill C-249 — showed a sharp partisan divide around the topic. A bill for the “encouragement of the growth of the cryptoasset sector” was introduced to the House of Commons in February 2022 by a member of the Conservative party and ex-Minister Michelle Garner. The lawmaker proposed having Canada’s Minister of Finance consult with industry experts to develop a regulatory framework aimed at boosting innovation around crypto three years after the bill’s passage.

Despite the voiced support from the local crypto community, the bill didn’t meet much approval among fellow lawmakers. During the second reading on Nov. 21–23, members of other political parties, including the ruling Liberal party, blasted both the proposition and the Conservative party with accusations of promoting the “dark money system,” and Ponzi scheme and bankrupting retirees and as a result, C-249 is now officially buried.

While Michelle Garner introduced the bill, Conservative party leader Pierre Poilievre took most of the heat. A former Minister of Employment and Social Development, Poilievre has been advocating for more financial freedom through tokens, smart contracts and decentralized finance. Earlier this year, he urged the Canadian public to vote for him as their leader to “make Canada the blockchain capital of the world.”

The next general elections in Canada are scheduled for 2025, and given C-249’s failure and the general condition of the market, it’s not likely that Poilievre and the Conservatives will get broad support in the Parliament for their pro-crypto efforts until that time. Currently, the Conservative party holds only 16 out of 105 seats in the Senate and 119 out of 338 in the House of Commons.

What’s next

From a trading platform perspective, there are specific challenges that the industry strives to address, Julia Baranovskaya, chief compliance officer and co-founding team member at Calgary-based NDAX, told Cointelegraph.

The majority of industry stakeholders would like to see “clear guidelines and a risk-based approach.” Currently, a majority of regulatory authorities in Canada have chosen to apply existing financial industry rules and regulations designed and implemented for the traditional financial industry.

However, Baranovskaya highlighted that in recent years, regulators have been engaging in a closer dialogue with the crypto industry. The Securities Commission has created a sandbox and encouraged crypto asset trading platforms and innovative types of businesses offering alternative financial instruments to join. The IIROC has also been leading a dialogue with the industry participants to understand business models better and identify how the current framework can be applied to them.

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But, the challenges of the fragmented regulatory framework and the lack of crypto asset-specific regulations are still here. Most of the existing regulations are based on the product, but with the constantly evolving crypto space, the product-based approach “would always stay a few steps behind.” In Baranovskaya’s words:

“Understanding the underlying technology behind crypto assets and De-Fi products that work out a flexible but robust regulatory regime that can adjust to the ever-changing crypto asset space is essential.”

Approving a spot crypto ETF is ‘all about political power’ — Perianne Boring

According to the Chamber of Digital Commerce CEO, passing any kind of legislation — including bills on crypto and blockchain — will be “incredibly difficult” in a divided government.

Perianne Boring, founder and CEO of blockchain advocacy group Chamber of Digital Commerce, placed the lack of approval of a Bitcoin exchange-traded fund in the United States squarely on Securities and Exchange Commission chair Gary Gensler, suggesting politics played more of a role than economics.

Speaking to Cointelegraph at the Texas Blockchain Summit in Austin on Nov. 18, Boring said the events surrounding FTX’s collapse may have “emboldened the regulation by enforcement approach” from the U.S. Securities and Exchange Commission and Treasury, with Republican lawmakers likely to focus on oversight using their House majority in the next Congress. According to the Chamber of Digital Commerce CEO, passing any kind of legislation — including bills on crypto, blockchain, and stablecoins — will be “incredibly difficult” in a divided government, making the possibility of executive orders and regulation by enforcement more likely.

“In the House side, we’re going to see increased oversight efforts, but I don’t think crypto is actually going to be the priority,” said Boring. “Oversight hearings […] they’ll have subpoena authority, they have the authority to administer oaths, so they could bring in different people within the agencies to scrutinize their approach to digital assets.”

The Chamber CEO suggested the seeming lack of urgency from Congress could delay the passage of crypto-related legislation, while a Bitcoin (BTC) exchange-traded fund, or ETF, was in the SEC’s hands:

“It’s been a decade since the first spot Bitcoin ETF was put forward […] We still don’t have one, but we have a futures Bitcoin ETF. So, how does this make sense? It’s all about political power, so it really comes down to chairman Gensler.”

Did you know the industry has been trying to bring a spot #bitcoin ETF to market since 2013? Almost 10 years in the making and we still don’t have one. Begs the question: why? Our report breaks this down and more https://t.co/QdnstH1rpa

— Perianne (@PerianneDC) October 7, 2022

Boring clarified that Gensler prioritized oversight of crypto exchanges prior to the SEC approving any spot crypto investment vehicle. Under the SEC chair, the financial regulator has turned down or delayed decisions on numerous applications for spot crypto ETFs, including from Grayscale, Bitwise, VanEck, and ARK 21Shares. Grayscale filed suit against the government agency in June following its latest ETF rejection.

Approving a spot crypto ETF is ‘all about political power’ — Perianne Boring

According to the Chamber of Digital Commerce CEO, passing any kind of legislation — including bills on crypto and blockchain — will be “incredibly difficult” in a divided government.

Perianne Boring, founder and CEO of blockchain advocacy group Chamber of Digital Commerce, placed the lack of approval of a Bitcoin (BTC) exchange-traded fund (ETF) in the United States squarely on Securities and Exchange Commission chair Gary Gensler, suggesting politics played more of a role than economics.

Speaking to Cointelegraph at the Texas Blockchain Summit in Austin on Nov. 18, Boring said the events surrounding FTX’s collapse may have “emboldened the regulation by enforcement approach” from the U.S. Securities and Exchange Commission and Treasury, with Republican lawmakers likely to focus on oversight using their House majority in the next Congress. According to the Chamber of Digital Commerce CEO, passing any kind of legislation — including bills on crypto, blockchain and stablecoins — will be “incredibly difficult” in a divided government, making the possibility of executive orders and regulation by enforcement more likely.

The Chamber CEO suggested the seeming lack of urgency from Congress could delay the passage of crypto-related legislation, while a Bitcoin ETF was in the SEC’s hands:

“It’s been a decade since the first spot Bitcoin ETF was put forward […] We still don’t have one, but we have a futures Bitcoin ETF. So, how does this make sense? It’s all about political power, so it really comes down to chairman Gensler.”

Did you know the industry has been trying to bring a spot #bitcoin ETF to market since 2013? Almost 10 years in the making and we still don't have one. Begs the question: why? Our report breaks this down and more https://t.co/QdnstH1rpa

— Perianne (@PerianneDC) October 7, 2022

Boring clarified that Gensler prioritized oversight of crypto exchanges prior to the SEC approving any spot crypto investment vehicle. Under the SEC chair, the financial regulator has turned down or delayed decisions on numerous applications for spot crypto ETFs, including Grayscale, Bitwise, VanEck and ARK 21Shares. Grayscale filed suit against the government agency in June following its latest ETF rejection.

SEC pushes deadline to decide on ARK 21Shares spot Bitcoin ETF to January 2023

“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change,” said the SEC.

The United States Securities and Exchange Commission, or SEC, has extended its window to decide on whether shares of ARK 21Shares’ Bitcoin exchange-traded fund could be listed on the Chicago Board Options Exchange BZX Exchange.

In a Nov. 15 announcement, the SEC issued a notice for a longer designation period for the application of ARK 21Shares’ Bitcoin (BTC) ETF, originally filed with federal regulator on May 13. The SEC twice extended its window to approve or disapprove of the crypto investment vehicle in July with an extension and in August with a comment period.

“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” said SEC assistant secretary Sherry Haywood. “Accordingly, the Commission […] designates January 27, 2023, as the date by which the Commission shall either approve or disapprove the proposed rule change.”

Ark Invest originally partnered with Europe-based ETF issuer 21Shares to file for a spot Bitcoin ETF listed on the Cboe BZX Exchange in 2021, but the SEC rejected the application in April. With the Nov. 15 announcement, the federal regulator has effectively exhausted its ability to continue to delay a decision on the crypto ETF under current SEC rules.

To date, the SEC has never approved a spot crypto ETF in the United States but gave the green light to investment vehicles linked to BTC futures with a fund from ProShares starting in October 2021. Upon having its application rejected, digital asset manager Grayscale pursued legal action against the SEC, arguing its refusal to approve a BTC ETF was “arbitrary, capricious and discriminatory.” Other firms including VanEck have continued to pursue applications with the SEC for a crypto spot investment vehicle.

Rivals steadfast even as two Aussie crypto ETF providers bail

The last week has seen two digital asset ETF providers announce their planned exit from the market amid regulator scrutiny and the prolonged crypto winter.

Two digital asset exchange-traded fund (ETF) issuers in Australia are set to leave the market amid heightened regulator scrutiny and a deepened crypto winter, though some remain bullish about the market’s prospects.

In the last week, Australian crypto ETF providers including Holon Investments and Cosmos Asset Management have indicated they may be stepping back from the crypto ETF scene.

On Nov. 6, Holon said it might close its three retail crypto funds following a hardline stance from the Australian financial regulator, which has accused the fund of failing to “describe the risks to investors in its target market determination filings,” ac cording to a report from the Australian Financial Review (AFR).

It comes after the Australian Securities and Investments Commission (ASIC) issued an interim stop order on Oct. 17 directed at Holon’s three funds due to non-compliant target market determinations (TMDs).

The AFR report notes that Holon has argued that the crypto funds were designed to be part of a diversified portfolio, not the majority of an investment strategy, though it may have fallen on deaf ears.

Another crypto ETF issuer, Cosmos, is also jumping ship with last week’s announcement that it would de-list its crypto ETFs from the Cboe Australia exchange.

According to the report, sources stated that Cosmos failed to attract sufficient assets under management to remain viable. It also had heavy overheads in crypto custody and professional indemnity insurance costs.

According to public disclosures in September, Cosmos had around $1.6 million in assets under management (AUM) for its combined Bitcoin (BTC) and Ether (ETH) funds.

However, some crypto ETF providers appear to remain committed to the market, which is expected to see one million new crypto adopters over the next 12 months, according to a recent survey from crypto exchange Swyftx.

Providers currently involved in the Australian crypto ETF market include 3iQ Digital Asset Management, Monochrome Asset Management, and Global X Australia, formerly known as ETF Securities.

Global X Australia chief executive Evan Metcalf told the AFR that the firm continues to have a “strong conviction in digital assets and has no plans to close any crypto ETPs,” noting:

“We are very bullish on the crypto markets in general, digital assets, and decentralized finance — we see enormous potential there.”

Metcalf did, however, note that the funds had experienced a “relatively quiet” reception from investors amid the current market downturn, while there was an “unwillingness” from local stockbrokers to provide clients access to its funds.