The corporate regulator has warned that exchange-traded products using cryptocurrency as their underlying assets need to be “facilitated in a way that maintains investor protections”, saying they present a real risk of harm to consumers.
On Wednesday, ASIC released its Consultation Paper 343 on crypto assets as underlying assets for ETPs and other investment products providing investors with exposure to crypto assets.
The paper signalled ASIC’s expectations for market operators and issuers of crypto ETPs, including identifying underlying assets that are appropriate and establishing good practice in respect of pricing, custody, risk management, and disclosure.
The regulator said it was seeking to finalise its position on good practices for market operators and was seeking industry consultation by 27 July.
Given the crypto market is still largely unregulated globally, ASIC said there were “unique, evolving characteristics and risks involved with crypto-assets”.
“The proposals in this consultation paper have been developed on the basis that ETPs and other investment products that invest in, or provide exposure to, crypto-assets are financial products under the Corporations Act, and therefore fall within ASIC’s regulatory responsibility,” the regulator said.
“Market operators and product issuers need to be mindful of meeting their existing regulatory obligations when creating, operating and allowing such products, so they can be facilitated in a way that maintains investor protections and Australia’s fair, orderly and transparent markets,” ASIC commissioner Cathie Armour said.
The regulator said while it was aware of the demand for domestic crypto ETPs, there was a “real risk of harm to consumers and markets if these products are not developed and operated properly”.
“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 corporate watchdog said.
“Similar issues have been, or are being, actively considered by other jurisdictions in the context of their regulatory frameworks.”
However ASIC said the way crypto assets themselves were classified and regulated domestically remained “a matter for government” and was actively being considered by the Senate fintech committee.
“ASIC regulates crypto-assets and related products and services to the extent they fall within the existing regulatory perimeter of financial products and services,” the regulator said.
“Crypto-assets may be or involve financial products depending on their individual features. It is the responsibility of each crypto-asset service provider to ensure they are complying with all relevant Australian laws including those administered by ASIC.”