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The Commissioner also reiterated its stance on cyber attacks and companies that fail to protect personal data.
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ASIC outlines key strategies for crypto regulation
13 October 2022
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ASIC Commissioner Sean Hughes has outlined the regulator’s key strategies for crypto regulation and warned investors about the risks of the digital assets.
He said fragmented crypto regulation meant some operators were taking advantage to provide digital asset products similar to traditional financial options but outside regulatory oversight and protection for investors.
Speaking at the annual GRC Institute conference, Mr Hughes outlined three cornerstones of ASIC’s crypto regulation strategy to protect the increasing number investing in the market.
“First, to support the development of an effective regulatory framework for crypto assets,” said Mr Hughes.
ASIC was pleased that the government would be initiating token mapping as part of the progression to a regulatory framework for crypto in an enhanced focus on consumer protection.
“Second, to take enforcement action to disrupt and deter harmful products within ASIC’s jurisdiction,” said Mr Hughes.
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“Third, to collaborate and cooperate with our domestic and international peers. This is important because crypto is a phenomenon that does not respect the limits of the mandate of individual regulators, nor global borders.”
“Market fragmentation and the risk of inconsistent regulatory treatment can lead to arbitrage and expose consumers to greater harm.”
Mr Hughes was also concerned that the majority who invest in crypto fail to recognise its risks as an investment.
“ASIC recently released research on investor behaviour revealing that, of the 1,053 active investors surveyed, 44 per cent held crypto assets,” he said. “Of those, only 20 per cent considered their investment approach to be risk-taking.”
Mr Hughes said this outcome was a cause for concern as crypto should be viewed as a risky investment option susceptible to rapid change.
“In reality, we know that crypto-assets are highly volatile, inherently risky, and complex,” he said.
“Globally, crypto users have lost about $2 trillion in the value of their holdings during the course of this year.”
“Sadly, many of those investors whom ASIC surveyed last year — at what turned out to be the peak of crypto prices — have probably shared in these very significant losses.”
Mr Hughes also spoke about cyber security and the steps ASIC was taking to protect consumers. These included taking action against firms which failed to ensure the protection of consumers’ and clients’ personal information.
“ASIC recently took successful action against RI Advice in relation to a series of cyber attacks and data breaches affecting clients’ personal information,” said Mr Hughes.
“The firm failed to ensure that robust information protection and cyber security measures were in place.”
“The Federal Court’s judgement reinforces that managing cyber risk is a key part of licensees’ obligations to act fairly, honestly and efficiently and to have appropriate risk management systems.”
He said that the commission would continue to monitor cyber resilience among regulated entities and act accordingly.
“That means egregious failures to mitigate the risks of cyber attacks are likely to result in enforcement action.”
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