The Australian Securities and Investments Commission has bolstered it cryptocurrency team as it looks to regulate more digital assets by classifying them as financial products, a move that would make selling them to Australians more difficult.
Asic has yet to decide whether to classify Ethereum, the second most popular cryptocurrency after bitcoin, as a financial product after the way the currency operates changed last week.
Most cryptocurrencies have not been regulated by Asic because they do not meet the definition of a financial product, depriving the authority of jurisdiction.
However, the regulator increased the size of its crypto team in March amid a wave of collapses in the industry that devastated investors who poured money into the sector as prices soared in late 2020.
Other regulators have also begun taking a closer look at cryptocurrency, with the US Securities and Exchange Commission becoming aggressive in its approach to whether individual coins, including Ethereum, qualify as securities, bringing them under its regulatory umbrella.
“We’re not going to be the cheerleaders for crypto assets,” Asic’s executive director for markets, Greg Yanco, said.
Because cryptocurrencies are mostly not financial products, the exchanges that trade them are largely untouched by Australian regulation, aside from a requirement to report transactions to the financial intelligence agency, Austrac.
But if Asic decided that one or more of the more popular coins were financial products, the exchanges would either need to delist them or become subject to a list of regulatory requirements.
They will need financial services licenses, which may require proof that they hold large sums of capital in reserve, and would be required to keep client funds separated – something that collapses overseas have revealed was not standard practice.
A bigger challenge would be meeting new design and distribution obligations regarding financial products that came into force in last October as…
