The action advances as governments and authorities across the world attempt to control the digital asset market in the wake of growing investor interest in cryptocurrencies, which are volatile and dangerous for both consumers and financial institutions.
The Australian Securities and Investments Commission (ASIC) declared on Wednesday that it will seek feedback from market players on suggestions to identify acceptable crypto assets and establish good market practices for financial instruments that deal in digital currency-backed assets. The most popular cryptocurrency, Bitcoin, has had its price fluctuate drastically this year, trading around $35,500 on Wednesday after reaching an all-time high of well under $65,000 in mid-April.
If exchange-traded products (ETPs) and other instruments exposed to crypto-backed assets are not established and regulated correctly, the Australian Securities and Investments Commission (ASIC) sees a “real risk of harm to consumers and markets.” To safeguard retail investors and promote fair market practises, the regulator proposes establishing good practises in the price, ownership, risk management, and disclosure of these instruments.
“Market operators and product issuers need to be mindful of meeting their existing regulatory obligations when creating, operating and allowing such products,” ASIC Commissioner Cathie Armour stated. According to the recommendations, these assets are considered financial instruments under Australian corporate law, and so are regulated by ASIC.
Following the consultation on the suggestions, the agency will produce a feedback report and disseminate information on best practises, according to the statement. The Australian Securities and Investment Commission (ASIC) is seeking comments from market players on whether crypto underpinning products can fulfil existing ETP standards in a consultation document.
ASIC is looking forward to determining if cryptos are acceptable underlying assets, whether they can be consistently valued, and how they should be categorised in terms of underlying asset regulations.
The study invites input on two major aspects of how an ETP may influence the market: compliance costs and competitive implications. The Australian Securities Exchange, one of the country’s major bourses, is now evaluating proposals for the establishment of a domestic ETP before the end of the year.
“At this point in time, in our view, the only crypto-assets that are likely to satisfy these factors are bitcoin and ether,” the regulator remarked.
The question is that how product issuers can guarantee that these products comply with the existing regulatory framework, notably in terms of custody, risk management, and transparency, was also raised.
Exchange-traded funds, managed funds, and structured products – a security or derivative that provides financial exposure to the performance of underlying assets – are the three forms of ETPs available in Australia.
“We are aware of interest in, and demand for, domestic crypto-asset ETPs,” said the regulator. “However, we are also aware of the real risk of harm to consumers and markets if these products are not developed and operated properly.”