Common questions about crypto ETFs, answered
What are crypto ETFs?
Crypto ETFs are exchange traded products with exposure to crypto-assets.
Crypto ETFs are complex investment products. Before investing in crypto ETFs, it is essential you carefully read the Product Disclosure Statement (PDS) supplied by the issuer of the crypto ETF you are considering purchasing, including the sections in the PDS setting out key risks, the fees and expenses related to the crypto ETF. You should also consider seeking advice from a professional adviser and consider whether you need any further information to understand the relevant crypto ETF or any underlying exposure to crypto-assets.
Here are the crypto ETF PDS currently available in the Australian market:
What are crypto-assets?
Crypto-assets are digital assets which are capable of being transferred by a party, secured cryptographically and commonly supported by blockchain or distributed ledger technology. Each crypto ETF will have exposure to different crypto-assets.
What risks do crypto ETFs typically carry?
In addition to the various risks relevant to investing in an ETF, crypto ETFs are subject to a range of additional risks related to their underlying exposure to crypto-assets. These include, but are not limited to:
Volatility and unpredictability of crypto-asset prices: Prices of crypto-assets may fluctuate materially and in very short timeframes and may be impacted by a multitude of events or circumstances, none of which can be controlled or influenced by you or the issuer of the crypto ETF. The prices of crypto-assets may be influenced by unpredictable events including, among other things, changing supply and demand, regulation, media statements, and other events.
Technology and cyber risks: Crypto-assets or any related protocol or other technology may be adversely affected by failure of technology or disruption to services, including as a result of scheduled maintenance, incidents or malicious actors. This may result in crypto-assets being lost, hacked, stolen or inaccessible. As a result, the value of a crypto-asset may decline, including to zero.
Custody risk: There are risks related to how the relevant crypto ETF issuer holds exposure to crypto-assets. For example, private keys could be lost or stolen, or the issuer could be exposed to the performance of the exchange provider.
For further information concerning risks associated with crypto-assets, you may refer to the following websites and search "crypto" or "crypto currencies" (or other such similar terms):
Are crypto ETFs regulated?
Securities issued by crypto ETFs are financial products under the Corporations Act. This means the issuer must hold an Australian Financial Services Licence (AFSL) and comply with a range of financial services regulation. Whether an underlying crypto-asset in which the crypto ETF invests is a regulated product either in Australia or elsewhere will depend on the features and characteristics of the particular crypto-assets.
What type of investor would typically purchase crypto-assets?
An investment in a crypto ETF is a complex, volatile investment with a high risk of loss of capital. These products are typically designed to be held as a small allocation of a portfolio by investors with a very high risk appetite who can accept losses to target a higher return. A person considering investing should always assess the particular features, characteristics and risks of a crypto ETF against their own objectives and risk appetite in determining whether it is suitable.
What is CommSec’s role in relation to crypto ETFs?
CommSec is a broker through which customers may trade in listed crypto ETF securities. The crypto ETFs are not issued by or otherwise related to CommSec or any other member of the CommBank Group. CommSec makes no warranties, representations or statements (express or implied) in relation to the nature, characteristics, status or performance of any crypto ETF.
How do I trade crypto ETFs?
Even though the risks are different, the process for trading in crypto ETFs is like other ETFs available on Cboe Australia or ASX.
Disclaimer
This information is not advice and is general in nature. The information has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial situation or needs and, if necessary, seek appropriate professional advice. You can view the CommSec Trading Terms and Conditions, Best Execution Statement and Financial Services Guide and should consider them before making any decision about these products and services.
Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.
