ASIC seeks consultation on crypto-asset based ETPs and other investment products

Karthik Subramanian

The Australian Securities and Investment Commission (ASIC) has released a consultation paper that seeks varied opinions about the use of crypto-asset as the underlying instrument for Exchange Traded Products (ETPs) and other such investment products.

The demand for crypto-backed ETPs has grown around the world and the ASIC recognizes this demand. Regulators in different parts of the world have been dealing with this big interest in their own individual manner with regulators like the SEC choosing to sit on it for many months. The ASIC has said that it understands the unique features and risks that are associated with the crypto assets as a whole and that is why it believes that a far-ranging consultation and consideration has to take place before any changes or regulations can be brought in.

It is also important for the investment and financial firms to understand the kind of risks that they are dealing with and pass on the same information to the investors who choose to invest in such products.

The main considerations for the ASIC at this point are to choose the right crypto assets for the various investment products and to establish the best practices for the custody, pricing, and risk management of such products. The crypto domain is an evolving one at this point and hence the ASIC wants to be careful and also understands that any regulations or best practices that are established now would need to change according to the change in market conditions over time.

ASIC Commissioner Cathie Armour said, ‘The proposals set out good practices for market operators and product issuers regarding crypto-asset ETPs and other investment vehicles that provide retail investors with exposure to crypto-assets.’

‘Market operators and product issuers need to be mindful of meeting their existing regulatory obligations when creating, operating, and allowing such products, so they can be facilitated in a way that maintains investor protections and Australia’s fair, orderly and transparent markets,’ Commissioner Armour said.

The ASIC also makes it clear that the legality and classification of the crypto assets themselves are something for the Government to decide and that the release of the consultation paper does not in any way pre-determine what they are going to decide on in this matter. The last date for the interested parties to make their submissions on the paper is July 27, 2021, after which the ASIC would consolidate the feedback and issue a report. The final information on the good practices to be followed for crypto asset-backed ETPs would be issued shortly afterward.

This news should be a shot in the arm for the crypto industry in Australia as it shows that the regulators are seriously looking into crypto-based products and this could soon translate into regulations that would then bring in larger investors into the market for the ETPs and other crypto-related products. This would help the cryptos to grow as an alternative investment asset and thus be pushed into the mainstream.

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