Banks and ASICs take on FTX over crypto licensing

[ad_1]

The ASIC position is at odds with the consensus view of crypto and blockchain industry players, including FTX Australia, the local arm of bankrupt mega-exchange FTX, whose founder Sam Bankman- Fried was arrested this week for fraud and money laundering.

In its submission, FTX Australia, which went into administration on Nov. 10, a day before its parent company filed for Chapter 11 bankruptcy in the United States, said the 21-year-old laws governing the classification and distribution of financial products were not suited to their purpose.

Companies law and therefore the definition of a financial product were written before the invention and proliferation of crypto-assets, and as such can cause significant friction for crypto-asset businesses that do not are unsure of the regulatory scope, he said.

While some assets such as the crypto-asset derivatives offered by FTX are clearly financial products, it would not be appropriate for this classification to apply to all crypto-assets.

He argued that the government should prioritize innovation when regulating the crypto sector, while opposing a possible requirement for exchanges to use local third-party custodians to safeguard customer funds. . Mr Bankman-Fried was one of three directors in the collapse of FTX Australia.

Industry body Blockchain Australia, which represents start-ups and crypto exchanges but also includes traditional service providers such as KPMG, PwC, Deloitte, Mastercard and the Australian Securities Exchange among its members, also objected. to calls to classify crypto assets as financial products.

We are unequivocally against bringing all crypto assets into the financial product regulatory regime. The option to do so as a simplified path to regulatory certainty is flawed, the lobby group wrote.

The complexity of the issues raised in this response to the consultation speaks to the work that needs to be done to create a suitable regime that both protects consumers and encourages investment and innovation in the sector, he continued. , echoing the language used by FTX in its communication.

In 2014, ASIC recognized the challenges associated with classifying cryptocurrencies as financial products, including the fact that they are generally not facilities through which someone can make non-cash payments .

But in its submission, ASIC said the crypto market has since become more complex and more closely intertwined with the traditional financial system, blurring the line between crypto and financial products. He also reiterated his concern that too few investors in crypto assets understand the inherent risks associated with the nascent market.

The Australian Banking Association supported ASIC’s position, opposing the introduction of the new CASSPr regulatory regime.

The main recommendation of the ABA is to use existing licensing regimes, in particular the Australian Financial Services License (AFSL), to regulate secondary crypto services where the crypto asset is functionally similar to a financial product but does not meet not strictly to the definition of a financial product, the lobby group wrote.

Commonwealth Bank agreed with its own submission, which said that viewing crypto assets as financial products would consistently enshrine the goals of investor protection, effective competition, market integrity, and risk management.

The Financial Services Council, which represents retail pension funds, investment firms and life insurers, wrote: There is a risk that the creation of a new crypto licensing regime will leave retail consumers without the benefit of protections, built over time in the regulatory framework for financial services.

The submissions came as part of a consultation on proposals from last year’s report by the parliament’s select committee on Australia as a technology and financial hub, chaired by coalition senator Andrew Bragg. But they should inform governments’ approach to crypto regulation.

[ad_2]