Dan Annans Cosmos to delist Cosmos Purpose Bitcoin Access, Cosmos Purpose Ethereum Access, Cosmos Global Digital Miners Access

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According to its September disclosure, the Cosmos Purpose Bitcoin Access ETF had about $850,000 in assets under management, the Cosmos Purpose Ethereum Access ETF had around $232,000 and the Cosmos Global Digital Miners Access ETF had about $632,000.

Cosmos declined to comment on the reasons for the delisting, but in a statement Mr Annan said it still had faith in crypto markets and that investor assets were protected.

While we strongly believe in the asset class, we are all disappointed with this result, Mr Annan said. The ETFs are ring-fenced by independent external service providers, which is a key transparent risk mitigation structure across all asset classes … We will continue to follow the process in the best interests of all unitholders.

Sources close to the firm said it had struggled to gain sufficient investor traction to cover the significant costs of running the crypto ETFs, such as the unique and costly professional indemnity insurance arrangements required.

Made sense to exit

Cosmos was owned by Nasdaq-listed Mawson Infrastructure, but the Australian-born bitcoin miner wrote down the value of its local funds management foray in August. In a filing with the US Securities and Exchange Commission, Mawson disclosed he had suffered an impairment relating to his Cosmos subsidiary of $US1.1 million during the six months to June 30, 2022.

It is understood Mawson subsequently transferred ownership of the asset, which was no longer material, to a third party.

Mawson chief executive James Manning said the decision to sell Cosmos was motivated by a desire to refocus on its core bitcoin mining and infrastructure operations. We recognize that ETFs are a scale business and a long game, Mr Manning told The Australian Financial Review. We didnt want to be in that long game and it made sense for us to exit.

Mr Annan declined to comment on the transaction.

Mawson operates bitcoin mining facilities in Texas, Georgia and Pennsylvania in the US, as well as the far north coast of NSW. It listed on the Nasdaq in September 2021 at $US11.50 a share, but that has since slid to US44 as it and others wait out the crypto market downturn. Its stock was among the portfolio holdings of Cosmos DIGA fund.

Meanwhile, the corporate regulator has upped its scrutiny of crypto funds marketed to retail investors. Earlier this month, investment manager Holons three crypto funds were suspended from raising new assets for 21 days because its target market determinations were incomplete.

ASX funds pending

Early investors in Cosmos bitcoin and ethereum ETFs lost money, but a strong US dollar has helped as investment is unhedged in currency terms.

Cosmos bitcoin ETF is down 25 per cent since its May 12 inception date while the ethereum ETF is down 9 per cent, compared with an 18 per cent decline in the underlying ethereum asset in US dollar terms.

The Australian Securities Exchange has received applications from would-be issuers but has so far not admitted any ETFs backed by cryptocurrencies.

Global Xs local bitcoin and ethereum ETFs have raised about $8.7 million in assets according to recent disclosures. Canadian firm 3iQ Digital Management also listed two crypto-backed funds but has raised less than $350,000, according to disclosures.

The largest of the crypto related exchange-traded funds is the Betashares Crypto Innovators ETF, which broke fundraising records with its launch in November last year. But that fund has fallen 75 per cent with assets under management now around $61 million.

Cboe Australia declined to comment.

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