Only Bitcoin and Ether would likely satisfy ASIC crypto approach

The Australian Securities and Investments Commission (ASIC) is making clear that if cryptocurrencies are to become a feature of the Australian retail investor marketplace then it will be the market licensees, not the regulator, who will have to make the case and shoulder the consequent load.

But it has made clear that, at this stage, only Bitcoin and Ether are likely to satisfy the criteria it sees a being necessarily applied.

At the same time as making clear that it has serious and continuing reservations about the use of crypto-currencies within exchange traded products (ETP), ASIC has issued a new consultation paper (CP 343) opening the way for licensees to make a valid case if they can.

“It is a requirement of quotation that an ETP be a suitable product for admission. This includes considering whether it is appropriate to offer retail investors exposure to the ETP’s underlying assets through a licensed Australian market,”

“Australian market licensees, as the primary gatekeepers for product admission, are responsible for making this assessment,” it said. “ASIC’s role is to supervise the conduct of Australian market licensees, including in this context, ensuring that market innovation is appropriately balanced against maintaining fair and efficient markets.”

“We do not consider that all crypto-assets are currently capable of being appropriate underlying assets for an ETP. We consider a principles-based approach ought to be used to determine whether a crypto-asset is capable of being an appropriate underlying asset for an ETP to support the fair, orderly and transparent operation of a licensed financial market,” ASIC says in the consultation paper.

ASIC said the standard of regulation should be that of a licensed derivatives market and said it proposed to work with Australian market licensees to establish criteria by which the licensees could determine whether a given crypto asset was an appropriate underlying asset for ETPs.

“Under this approach, market operators could determine that a particular crypto-asset is an appropriate underlying asset for ETPs on their market. We would not object to that determination, provided the licensee can demonstrate that the crypto-asset satisfies all of the factors [by ASIC].”

“At this point in time, in our view, the only crypto-assets that are likely to satisfy these factors are Bitcoin (BTC) and Ether (ETH),” the regulator said.