ASIC to keep monitoring threats of harm related to cryptocurrencies

Maria Nikolova

The regulator says it is developing its approach for applying the principles for regulating market infrastructure providers to crypto exchanges.

The Australian Securities & Investments Commission (ASIC) has earlier today published its Corporate Plan 2018-2022, with emerging products being in the focus of the regulator.

For 2018–19, the regulator has named several areas that need its particular attention – based on ASIC’s understanding of the operating environment and its strategic planning framework.

ASIC has identified potential harms from technology driven by the growing digital environment and structural changes in financial services and markets. The regulator says it will continue to focus on monitoring threats of harm from emerging products (e.g. ICOs and crypto currencies), cyber resilience, the adequate management of technological solutions by firms and markets, and misconduct that is facilitated by or through digital and/or cyber-based mechanisms.

The regulator says it is working on a new project and that it is developing its approach for applying the principles for regulating market infrastructure providers to crypto exchanges. ASIC is also monitoring emerging products, such as ICOs, and intervening where there is poor behaviour and potential harm to consumers and investors.

With regard to earlier efforts by ASIC in this direction, the regulator says it has formed internal cross-team working groups to better coordinate the work across ASIC on implementing new supervisory approaches – e.g. the new approach for regularly placing ASIC staff onsite in major financial institutions – and in relation to illegal phoenix activity, poor practices in the insurance sector, cryptocurrencies, corporate governance, older Australians, small business, and foreign financial service providers.

In April this year, the Australian regulator indicated it would be adopting a stricter stance on ICOs. ASIC Commissioner John Price warned about the opportunistic mood dominating in ICOs – including businesses or people looking to undertake an ICO because it is seen as an easy, low regulation and low cost option which could lead to immature businesses coming to market.

Let’s note that digital currency exchange businesses are required to register with Australia’s financial intelligence agency AUSTRAC. Under the new regulation, digital currency exchange (DCE) providers are required to:

  • enroll and register with AUSTRAC;
  • establish, implement and maintain an AML/CTF program, which sets the framework for businesses to comply with their obligations, including customer due diligence requirements;
  • report threshold transactions and suspicious matters to AUSTRAC, and
  • keep appropriate records.

But registration by AUSTRAC of a digital currency exchange or remittance service provider does not constitute endorsement of that business or compliance with any anti-money laundering and counter-terrorism financing (AML/CTF) obligations. DCE providers are not allowed to put AUSTRAC’s logo on their websites even if they are registered.

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