DigitalX, an ASX-listed company, announced on July 19 that cryptocurrency exchange Coinbase would be its custody partner for its new spot Bitcoin ETF (BTXX). The custody of the DigitalX Bitcoin ETF (BTXX) demonstrates the exchange’s growing role in supporting the infrastructure for Bitcoin ETFs worldwide. The BTXX seeks to provide returns that mirror the performance of Bitcoin by maintaining long-term holdings of BTC, making it a passive holder that will not buy and sell Bitcoin other than to facilitate redemptions and creation of Bitcoin interests. This partnership with Coinbase highlights the increasing importance of custodians in the growth of the ETF market as they secure billions of dollars worth of crypto that the ETF owns. Since the approval of spot Bitcoin ETFs in the United States in January 2024, Coinbase has become a partner and custody provider for ten spot Bitcoin ETFs and eight of the nine newly approved Ether ETFs.
The DigitalX Bitcoin ETF (BTXX) was launched on July 12, following approval from the Australian Securities Exchange (ASX) on July 9. This marks the growing acceptance and adoption of cryptocurrencies in Australia. The country’s first Bitcoin ETF, VanEck Bitcoin ETF (VBTC), was launched on the ASX on June 20. VBTC is structured as a feeder fund to provide exposure to Bitcoin by investing in VanEck’s US Bitcoin Trust (HODL), listed on the Chicago Board Options Exchange (CBOE). Australia has seen significant growth in crypto ownership and adoption, with the crypto ownership rate in the country standing at 17%, surpassing the global average of 15%. Independent research conducted by Roy Morgan shows that over 1.1 million Australians now own at least one form of cryptocurrency, and approximately 600,000 Australians have declared crypto holdings in their tax returns.
Despite the increasing interest and adoption of cryptocurrencies in Australia, the regulatory environment remains challenging. Binance Australia, for example, encountered issues in May 2023 when it had to suspend Australian dollar deposits and withdrawals due to third-party service provider issues. The situation escalated in July 2023 when ASIC conducted searches at Binance Australia’s offices, indicating the complexity of operating in the cryptocurrency space within Australia. The country’s regulatory framework for cryptocurrencies remains hostile, creating barriers to full-scale adoption and growth of the market. However, the growing number of crypto ETFs and Bitcoin ETFs in particular, suggest a positive trend towards mainstream acceptance and integration.
The global adoption of Crypto ETFs is expanding, offering investors innovative ways to engage with the evolving cryptocurrency market. Countries like the United States, Canada, Brazil, Germany, Australia, Hong Kong, and Switzerland have active Bitcoin ETFs, highlighting the widespread acceptance and interest in cryptocurrency investment products. The partnership between DigitalX and Coinbase for the BTXX Bitcoin ETF underscores the importance of established custodians in providing secure storage solutions for digital assets. With Coinbase’s track record as a custody provider for multiple Bitcoin and Ether ETFs, the collaboration with DigitalX is expected to enhance the accessibility and efficiency of cryptocurrency investments in Australia.
In conclusion, the partnership between DigitalX and Coinbase for the BTXX Bitcoin ETF in Australia is a significant development that highlights the growing role of established custodians in supporting the infrastructure for cryptocurrency ETFs. The launch of the BTXX Bitcoin ETF marks a positive step towards mainstream acceptance and adoption of cryptocurrencies in Australia, despite the challenging regulatory environment. As cryptocurrencies continue to gain traction globally, the availability of investment products such as Bitcoin ETFs provides investors with alternative ways to participate in the digital asset market. By partnering with Coinbase, DigitalX aims to offer investors a reliable and secure platform to gain exposure to Bitcoin, further contributing to the growth and evolution of the cryptocurrency ecosystem.
