ASIC’s Longo Commits to Action Against Certain ‘High Risk’ Crypto Products

Australia’s financial services and markets regulator has issued another stark warning to issuers of crypto-based financial productsespecially those who improperly market high-risk products.

Joe Longo, chairman of the Australian Securities and Investment Commission (ASIC), in a keynote speech at the annual ASIC forum on Nov. 3 local time, said he would use existing laws to police “risky and complex products” to protect consumers.

He added that “crypto and the crypto ecosystem continue to pose challenges and opportunities for regulators and policymakers,” saying the risks of investing in crypto are “often opaque,” ​​with assets being “highly volatile, inherently risky and complex”.

While his warning also encompassed non-crypto focused businesses, Longo was particularly aimed at issuers of crypto-based financial productsby warning them if their offer does not pass the ASIC test:

“Too often, issuers seek to market high-risk, niche investment products, including in some cases crypto-based products, to a very wide range of consumers.”

“We see issuers promoting high-risk products as suitable investments that will form a significant part of an individual consumer’s investment portfolio. This will not be tolerated and action will be taken,” he warned.

Longo said ASIC continues to use rules promulgated in October 2021 for financial products to have stricter target market determinations (TMDs) and material transaction disclosures outside of these TMDs to control “risky, volatile and complex products”.

ASIC recently used these powers on October 17, stopping three cryptocurrency-related funds should be offered to retail investors, due to non-compliant TMDs telling Cointelegraph they were “too broad […] given the volatility and speculative nature of the crypto markets.

Longo has taken a seemingly softer approach to blockchain and asset tokenization technology, noting that it has the potential to “provide new solutions to long-standing problems” and “revolutionize the way we trade.” “.

He noted the the work of regulators supporting the pilot from a room central bank digital currency (CBDC)stating that the ASIC is monitoring the pilot’s developments and how he will react and adapt, adding:

“While encouraging digital innovation, ASIC will act to disrupt and deter behavior that harms people. Harmful conduct that falls within our jurisdiction, including unauthorized conduct and the misleading promotion of crypto-asset financial products, are in our sights.

Related: Saying “No Financial Advice” Won’t Save You Going to Jail: Crypto Advocates

To sign on cryptocurrency later in the day, Longo said that crypto has “the ability to harm consumers and investors is really, really important” when trading digital assets and reiterated the difference between crypto and blockchain technology:

“My central message to consumers is that this is a risky, speculative and misunderstood activity, which must be distinguished from the innovation of the underlying technology.”

Longo said crypto brings together “key issues that ASIC are interested in: technology, innovation and new challenges for regulation.”

He spoke about the three “cornerstones” of the ASIC crypto regulatory strategy, which support the development of a regulatory framework and greater legal clarity for crypto and gathering information from international peers to inform government on an effective legal framework while continuing to disrupt and deter scams involving crypto.

Martin E. Berry