The JSE won’t have anything to do with listed cryptocurrency assets — at least for the time being.
It was only a matter of time before some asset managers waded into the cryptocurrency arena, but the JSE is, unsurprisingly, not ready to approve such listings as regulators are still coming to terms with digital currencies. The bourse has "concerns regarding the robustness and transparency of the various [cryptocurrency] spot markets", says John Burke, its director of issuer regulation.
The exchange is in talks with other regulators in SA about crypto-related products, Burke says.
"We believe these [issues] need to be discussed and agreed at a national level before crypto products should be listed on an exchange and subsequently acquired by retail investors and their pension funds," he says. He has declined to comment on Sygnia’s planned cryptocurrency fund, saying the JSE does not comment on engagements with clients.
Wierzycka says she is also not able to comment, as the JSE is sensitive about information concerning approvals.
Introducing a listed cryptocurrency fund would have further expanded Sygnia’s suite of financial products on the JSE. A year ago, the company expanded its ETF business by acquiring Deutsche Bank’s JSE-listed db X-tracker ETFs for R325m. Ironically, that came after Wierzycka levelled heavy criticism against the ETF market, though she said after the Deutsche Bank deal she had opposed only the costs of these products, including hefty trading costs and stockbroking fees.
Meanwhile, Sygnia is not the only local firm to have had its sights on listed cryptocurrency assets. Forus Global Digital Exchange, which launched SA-developed cryptocurrency Mahala Coin in March, has said it will seek a listing for the coin on the main board of the JSE and on other African exchanges.
The JSE told the FM recently it had not yet received an application for Mahala Coin.
While the JSE is by no means alone in its hesitancy to approve cryptocurrency listings, indications are that digital currency assets will inevitably find their way onto major stock exchanges.
The New York Times reported on Monday that the New York Stock Exchange’s (NYSE) parent company, Intercontinental Exchange (ICE), had been working on an online trading platform that would allow investors to trade bitcoin. ICE is also working on a project to allow banks to trade bitcoin swap contracts, which would be regulated under existing laws, the newspaper said.
And some exchanges, including the Chicago Mercantile Exchange, have already started offering futures contracts linked to the price of bitcoin.
But for now, cryptocurrency ETFs are yet to find a home on mainstream stock exchanges.
The US securities & exchange commission (SEC) recently shot down plans by fund providers — including ProShares — to list bitcoin ETFs, citing concerns about a lack of investor protection. ProShares said in September 2017 it wanted to list the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF on the NYSE. The firm withdrew its application in January after the SEC pushed back against the proposal — though the regulator has since softened its stance towards cryptocurrency funds.
SA regulators are also taking a cautious approach towards cryptocurrencies. The Reserve Bank’s new fintech unit has been tasked with reviewing the regulator’s position on cryptocurrencies — a process expected to be complete in the second half of the year.
Timothy Stranex, co-founder of SA-tied bitcoin and ethereum exchange Luno, told the positive for the market. "Regulation brings clarity to businesses and consumers.
"It helps keep out fraudsters, charlatans and other operators with low concern — or capabilities — to keep customer information and money safe."
Luno is in talks with regulators on "appropriate frameworks", Stranex says.
Some analysts say regulatory oversight could temper the volatility of digital currencies, which still suffer from wild price swings.
In the 30 days to May 7, bitcoin seesawed between R82,501 and R129,300, according to Luno’s prices.
Wierzycka, too, has in the past called for bitcoin to be regulated. "Hoping to see bitcoin regulated in SA as opposed to unregulated products and exchanges springing up," she said on Twitter last year.
Nigel Green, founder and CEO of the deVere Group, says the recent rally in cryptocurrency prices has been fuelled partly by the market’s realisation that regulation is inevitable. "[Regulations] will give investors more protection and long-term confidence in the market," he says.
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