Crypto ETP entities need license to operate in Australia – ASIC

Rick Steves

“Crypto-assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations.”

ASIC has introduced guidelines for product issuers and market operators in regard to crypto-asset exchange traded products (ETPs) and other investment products.

Australia’s financial watchdog has issued these information sheets on how entities can meet their regulatory obligations a few days after the Senate Select Committee on Australia as a Technology and Financial Centre released recommendations on developing an Australian regulatory framework for crypto-assets.

The Australian Securities and Investments Commission has covered good practices for market operators in how they admit and supervise these products, and good practices for product issuers in how they establish and operate these products.

Crypto ETP product issuers and market operators must learn the good-practice guide that includes admission and monitoring standards, custody of crypto-assets, pricing methodologies, disclosure, and risk management.

The guidelines can be found here:  Information Sheet 225 Crypto-assets (INFO 225) and Information Sheet 230 Exchange traded products: Admission guidelines (INFO 230).

As to entities that intend to hold underlying assets that comprise crypto-assets, these will need to acquire a crypto asset license (INFO 225). ASIC has recently introduced a new ‘crypto-asset’ category in the licensing application.

“Crypto-assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations. The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets”, said ASIC Commissioner Cathie Armour.

ASIC changed its good practices and licensing guidance following the June 2021 public consultation on crypto-assets as underlying assets for ETPs and other investment products.

The consultation received several comments from market participants in regard to the regulator’s proposals to establish good practices for these products within the existing regulatory regime and changes to the licensing regime, the majority of which was supportive, ASIC stated.

On 20 October 2021, the Senate Select Committee on Australia as a Technology and Financial Centre released its Final Report, with recommendations on developing an Australian regulatory framework for crypto-assets.

ASIC has made submissions to the Select Committee and will work with Treasury and Government as they consider the recommendations in the Final Report.

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