Bitcoin and ethereum ETFs pose real risk of harm to markets but could be viable if developed properly, says Australia’s top regulator

• Green-lighting crypto ETFs could risk "real harm" if not properly regulated, Australia's top financial regulator say.
• But the Australian Securities and Investments Commission also said that a well-thought-out ETF could be viable.
• The commission suggested that the existing six asset categories under Australian law don't accurately capture cryptocurrencies.
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Green-lighting crypto ETFs could risk "real harm to consumers and markets" if not properly regulated, Australia's top financial regulator said on Tuesday.

Writing in a paper calling for industry comment, the Australian Securities and Investments Commission noted significant consumer demand for crypto ETFs, but warned the products could easily do damage to consumers and markets if poorly designed.

Conversely, ASIC acknowledged that a well-thought-out crypto ETF could be a viable product, subject to the commission's standards. "At this point in time, in our view, the only crypto-assets that are likely to satisfy these [standards] are bitcoin and ether," it wrote.

ASIC's proposed standards included institutional adoption, transparent pricing mechanisms, and a "mature" spot market, echoing some of the SEC's concerns that the bitcoin market may be subject to manipulation.

The commission suggested that the existing six asset categories under Australian law don't accurately capture the behavior of cryptocurrencies. It proposed a new category, called "eligible crypto-assets," that would need new rules and definitions.

ASIC's difficulty categorizing crypto bears similarity to regulatory struggles in the US, where a patchwork of financial regulators have alternately classified bitcoin as property, a security, and a commodity.