The government and ASIC consult on crypto offerings

With cryptocurrency in the news almost daily, ASIC has released Consultation Paper 343 on crypto-assets as underlying assets for ETPs and other investment products providing investors with exposure to crypto-assets. And the Select Committee on Australia as a Technology and Financial Centre has launched a new round of consultation to review the federal policy framework around cryptocurrency and blockchain technology in Australia.

The ASIC paper asks for feedback from market operators and issuers of crypto ETPs on good practice in respect of pricing, custody, risk management and disclosure and also identifying crypto-assets that are appropriate underlying assets. It also seeks input on the role listed investment companies, listed investment trusts and unlisted registered managed investment schemes play in providing exposure to crypto-assets.

“ASIC considers that crypto-asset ETPs have novel and unique features that require consideration of whether such products can support fair, orderly and transparent markets and comply with our regulatory framework,” the regulator noted.

While clarifying that the classification and regulation of crypto-assets is a decision that rests with the federal government, ASIC is of the view that ETPs and other investment products that invest in, or provide exposure to, crypto-assets are financial products under the Corporations Act and therefore within ASIC’s regulatory responsibility.

ASIC noted it was aware of the increased popularity and demand for crypto-assets, but is concerned about the risk of harm to consumers and markets if these products are not developed and operated properly.

SAFAA has consulted with members who are of the view that regulated investment products should only be permitted in respect of a small subset of crypto-assets that can demonstrate robust liquidity, transparency and price discovery and will lodge a submission.

Meanwhile, Australian law does not currently treat cryptocurrency as money and the Reserve Bank of Australia (RBA) has no plans to release a central bank digital currency to retail customers. Cryptocurrencies have been brought into scope for Australia’s anti-money laundering framework – crypto exchanges need to register with AUSTRAC. One important issue for the federal Senate committee to consider is whether to define crypto products as financial products, which would extend the current fintech sandbox to include cryptocurrency and blockchain projects, or create a new one.