ASIC is concerned that Australian investors may not understand the risks of investing in cryptocurrencies after finding they now rank as the second most popular investment product.
About 44 per cent of the 1,053 retail investors surveyed in November last year reported holding crypto, behind only Australian shares, which were held by 73 per cent of the respondents.
Despite relatively high levels of crypto ownership, only 20 per cent of crypto investors viewed their investment approach as risk-taking, which ASIC chair Joe Longo said raised concerns about a lack of understanding regarding the risks of the asset class.
“We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto-asset products. This research does highlight during this particular point in time, the appeal of crypto-assets to the market,” he said.
“ASIC is also concerned that there are limited protections for crypto-asset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of crypto-assets to better protect investors.”
Bank trading platforms were found to be the most popular platforms, used by 31 per cent of the investors surveyed, followed by three unidentified crypto exchanges.
Out of all the crypto investors, a quarter stated that crypto was the only investment they held.
The next most popular investment products after Australian shares and crypto were found to be international shares (31 per cent), ETFs (28 per cent), gold or silver (21 per cent), residential investment properties (20 per cent) and term deposits (17 per cent).
The research also examined the main sources of investing information used by Australian investors.
Google was cited as a main information source by 34 per cent of respondents, while a combined 41 per cent utilised social media and networking platforms including YouTube (20 per cent), Facebook (11 per cent), podcasts (10 per cent) and finfluencers (10 per cent).
On their main financial-focused sources, investors pointed to financial institutions (21 per cent), the ASX (20 per cent), company websites (18 per cent), financial planners/advisers/brokers (13 per cent), company financial statements (12 per cent) and annual/quarterly company reports (12 per cent).
Additionally, the survey found that Australians aged 18 to 34 made up 51 per cent of recent investors who had started investing during or after March 2020.
“It’s encouraging to see more people, particularly younger investors, engaging in the market. A third of all surveyed investors said they are ‘in it for the long-term’. However, half of those surveyed admitted they have invested in things because they didn't want to miss out,” said Mr Longo.
“This, coupled with more complex and opaque financial product and service offerings, and the speed and reach of marketing and distribution through digital channels, may expose investors to new risks or higher levels of existing risks.”
ASIC said the findings have informed its work in the retail sector, including changing practices in retail product design and distribution, investor protection strategies and crypto-assets.
“With so many new investors active in financial markets, the research builds on our understanding of retail investors and helps us consider where our regulatory efforts are warranted,” Mr Longo said.
“ASIC is working to better understand the use of digital engagement practices and maintain regulatory pace with these developments. Risk is part of the investment process, but entities need to operate fairly and avoid the use of features that can harm investors.”
The ASIC chair had previously noted that crypto would be among the top priorities for the corporate regulator in 2022 alongside ESG and cyber resilience.
In January, ASIC issued a warning against investing in crypto through self-managed superannuation funds without obtaining proper financial advice.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.