ASIC’s Joe Longo talks crypto regulation and the irony of its supposedly trustless nature
Drawing historical parallels between today’s economic uncertainty and the Third Century Roman Empire’s financial instability, Longo emphasized that crypto, much like any form of money, relies heavily on trust. The irony, he noted, is that although cryptocurrencies were conceived as trustless systems, they have ended up necessitating substantial trust from consumers in various parties involved in the crypto ecosystem.
Amid the backdrop of an increasingly complex financial landscape and macroeconomic volatility, the Australian Securities and Investments Commission (ASIC) Chair Joe Longo did not mince words at the Australian Financial Review (AFR) Cryptocurrency Summit on October 16th.
His message was clear: crypto needs stringent regulation and strong enforcement measures to ensure consumer protection and maintain high standards comparable to traditional financial systems.
Conceived as trustless systems, cryptos need substantial trust from consumers
Drawing historical parallels between today’s economic uncertainty and the Third Century Roman Empire’s financial instability, Longo emphasized that crypto, much like any form of money, relies heavily on trust. The irony, he noted, is that although cryptocurrencies were conceived as trustless systems, they have ended up necessitating substantial trust from consumers in various parties involved in the crypto ecosystem.
Longo underscored the notion that crypto cannot be an exception to the rule. “Crypto must be held accountable to the same high standards we expect of everyone else,” he stated, adding that any service providers deploying new and innovative technologies should not expect regulatory exemptions.
His points resonate in a financial environment continually challenged by technological advances and shifting paradigms, where maintaining high standards of consumer protection is a moving target.
“Buying them remains highly speculative”
Longo also cautioned potential crypto investors, “Think twice before investing in crypto. Crypto-assets are inherently risky and complex. Buying them remains highly speculative.”
The crypto world has often touted ‘trust-less’ systems as a selling point. However, Longo argues that the reality is far from that ideal. Consumers place enormous trust in centralized entities that act as intermediaries for crypto transactions, which often lack regulatory oversight.
This trust was severely shaken during the recent “crypto winter,” following the collapse of Terra / Luna and FTX. This period revealed the vulnerabilities in trusting unregulated entities, amplifying the urgency for robust regulation.
Longo is not alone in pushing for a well-defined regulatory framework. International bodies such as the Financial Stability Board and the Bank for International Settlements are all working towards global consistency in crypto regulation. However, these initiatives are still nascent, and achieving universal governance over a borderless financial system remains a monumental task.
Longo believes the time is ripe to design a robust framework for Crypto
Domestically, the Australian Treasury has recently released a consultation paper focusing on the future regulation of crypto-asset service providers, signaling that regulatory developments are afoot. Longo believes the time is ripe to design a framework that learns from the failures and challenges of the crypto industry.
Regulations, however, are only as good as their enforcement. ASIC has already initiated several actions against crypto service providers operating at the edge of existing regulations. Longo stresses the need for strong enforcement mechanisms to make the regulatory framework effective. “We will not hesitate to act where we see harm,” he affirms.
Longo’s speech serves as a stern reminder that the path forward for crypto is not one devoid of oversight. His call for regulation and enforcement is not a stifling of innovation but a call for stability and consumer protection in a space fraught with complexities and risks.
The next chapter in the crypto narrative remains uncertain, but what is clear is that regulation will play a pivotal role in shaping its future. As the industry evolves, regulatory agencies like ASIC will be at the forefront, ensuring that the balance between innovation and consumer protection is not just maintained but fortified.
