ASIC’s Longo promises action against certain ‘high-risk’ crypto products

Australia’s Financial Services and Markets regulator has issued another stark warning against issuers of crypto-based financial products, particularly those who are inappropriately marketing high-risk products.

Joe Longo, head of the Australian Securities and Investments Commission (ASIC), said in an opening speech at ASIC’s annual forum on November 3 local time that it will use current laws to control “risky and complex products” to protect consumers.

He added, “Crypto and the crypto ecosystem continue to pose challenges and opportunities for both regulators and policymakers” and said the risks of crypto investments are “often opaque” with the assets being “highly volatile, inherently risky and complex.”

While his warning also included non-crypto-focused firms, Longo took particular aim at issuers of crypto-based financial products, letting them know if their offering did not pass ASIC’s standards:

“Too often, issuers seek to market high-risk and niche investment products, including in some cases crypto-based products, to a very broad range of consumers.

We see issuers that market high-risk products as suitable investments that will form a significant part of an individual consumer’s investment portfolio. This will not be tolerated and action will be taken,” he warned.

Longo said ASIC was continuing to use rules adopted in October 2021 requiring financial products to have stricter target market provisions (TMDs) and disclosures of significant business outside those TMDs to monitor “risky, volatile and complex products”.

ASIC recently used these powers on October 17, halting three cryptocurrency-related funds to be offered to retail investors due to non-compliant TMDs which it told Cointelegraph were “too broad” […] given the volatility and speculative nature of crypto markets.”

Longo took a seemingly softer approach to blockchain and asset tokenization technology, noting that it had the potential to “provide new solutions to long-standing problems” and “revolutionize the way we do commerce.”

Noting the regulators’ work supporting the pilot of a local central bank digital currency (CBDC), he said ASIC is monitoring the development of the pilot and how it will respond and adapt, adding:

“While encouraging digital innovation, ASIC will act to disrupt and deter conduct that harms people. Harmful conduct that falls within our jurisdiction, including unlicensed conduct and the deceptive marketing of financial products involving crypto-assets, is within our purview.”

Related: Saying ‘Not Financial Advice’ Won’t Keep You Out of Jail: Crypto Lawyers

On a panel on cryptocurrency later in the day, Longo said that crypto’s “capacity for consumer and investor harm is really, really significant” when trading digital assets, and reiterated the difference between crypto and blockchain technology:

“My central message to consumers is that this is a risky, speculative and poorly understood activity, which must be separated from the innovation of the underlying technology.”

Longo said crypto brings together “key issues that ASIC is interested in: technology, innovation and new challenges for regulation.”

He spoke of the three “cornerstones” of ASIC’s crypto regulatory strategy supporting the development of a regulatory framework and greater legal clarity for crypto and gathering information from international peers to inform the government of an effective legal framework alongside continuing to disrupt and deter. scams involving crypto.