Australian Financial Regulator To Focus on ICOs and Cryptocurrency Exchanges

The Australian Securities and Investments Commission (ASIC) published a report this week that details its plans to tightly scrutinize the crypto industry in the country.

The areas of great focus, according to the regulator, will be on crypto exchanges and Initial Coin Offerings (ICOs). The detailed report was part of the regulator’s ‘Corporate Plan 2018-2022′, which explained its plans for 2018 and 2019.

ASIC’s mandate includes oversight over the country’s financial services, markets, corporate investments, and consumer credit.

ASIC mitigating crypto risk for Australians

The ASIC commissioners gave a highlight of what the agency will focus on in the medium-term, specifying it would mainly be on what it termed as areas of ‘potential harm from technology’.

The agency stated that consumers were increasingly engaging with digital currencies and related technology in the financial sector. As such, there is a need to develop tighter cyber resilience procedures, particularly among exchanges and payment systems.

The commission explained that these stricter regulations would help to mitigate potential harms to consumers from systemic vulnerabilities. Quoting some World Economic Forum (WEF) figures, the regulator explained that two of the top five global risks in 2018 were cyber attacks and fraud.

It, therefore, plans to provide the necessary oversight to ensure threats from a growing digital environment do not adversely affect the consumer.

“We will continue to focus on monitoring threats of harm from emerging products (e.g. ICOs and cryptocurrencies) […]”

The body will also focus on ensuring firms that provide technological solutions comply with regulations to avoid ‘misconduct’ that is often committed through digital and cyber-based mechanisms.

Initial Coin Offerings (ICOs)

The one area the ASIC will closely monitor is the ICO ecosystem in the country, ensuring that the sector remains compliant and issues of misconduct do not proliferate.

In its report, ASIC added cryptocurrencies as a new project to its “Action 2018-19” list, explaining that the focus will be on:

“Developing our approach for applying the principles for regulating market infrastructure providers to crypto exchanges

Monitoring emerging products, such as ICOs, and intervening where there is poor behaviour and potential harm to consumers and investors”

Cryptocurrency exchange regulations

Concerning exchanges, the body has initiated a new project to streamline the industry and reduce potential harm to consumers and investors.

“Due to increasing consumer digital engagement and use of technology by the financial sector, there will be a need for stronger cyber resilience – particularly among firms that provide critical infrastructures e.g. exchanges and payment systems – to mitigate systemic vulnerabilities. “

The project involves developing approaches that help the body to enforce regulatory principles about the market to crypto exchanges.

While promising to do all it takes to protect the consumer and investor, the body also cautions the public that it can only do so much.

The message to the public is that they need to also do their own due diligence to protect themselves. It states that risks remain even in the face of increased regulatory oversight. ASIC writes in the publication that:

“[Our] regulatory system is not designed to eliminate market risk, prevent all wrongdoing, or ensure compensation for all investors who lose money as a result of misconduct.”

Blockchain to reshape Australia financial sector

Even as it looks to tighten its grip on monitoring the ICO and exchange industry, ASIC notes that blockchain technology will continue to reshape Australia’s financial services industry.

It also notes that innovations within the industry will increase efficiencies in various other sectors of the country’s economy, including settlements, data reconciliation, and asset management.

ASIC’s report does also recognize the role blockchain and DLT, noting that even the Australian Securities Exchange (ASX), will replace its own Clearing House Electronic Sub-register System (CHESS) with a distributed ledger technology solution by 2021.