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ASIC, Cryptocurrency

ASIC seeking best practice in crypto offerings

ASIC crypto-assets investors

ASIC has raised concerns about how ETPs and other investment products provide access to crypto-assets for retail investors.

The level of exposure to crypto-assets for retail investors through exchange-traded products (ETP) will be reviewed by the Australian Securities and Investments Commission (ASIC), which has called for feedback on how investment products provide exposure to the digital assets.

ASIC made the call for feedback as part of “Consultation Paper 343: Crypto-assets as underlying assets for ETPs and other investment products” and is also seeking input on the role listed investment companies, listed investment trusts and unlisted registered managed investment schemes play in providing exposure to crypto-assets.

The corporate regulator said it was aware of the increased popularity and demand for crypto-assets, but “there is 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,” it said.

In calling for feedback, ASIC has asked market operators and issuers to focus on two key areas: identifying crypto-assets that are appropriate underlying assets and establishing good practice in respect to pricing, custody, risk management and disclosure.

ASIC commissioner Cathie Armour said further regulation should be implemented to protect investors against being overly exposed to high-risk assets.

“The proposals set out good practices for market operators and product issuers regarding crypto-asset ETPs and other investment vehicles that provide retail investors with exposure to crypto-assets,” Armour 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.”

While the classification and regulation of crypto-assets was dependent on the federal government, ASIC said it is within its remit to regulate within the existing “perimeter of financial products and services”.

“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,” it said.

The regulator said discussions with stakeholders have already commenced and submissions from interested parties should be lodged by 27 July, after which it will issue a report.

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