The Australian Investments and Securities Commission (ASIC) has cautioned Australian citizens from investing in unregulated cryptocurrency platforms. As crypto becomes a mainstream financial option, the likelihood of using an unlicensed crypto platform increases, with several investors reporting losses when using such platforms.
ASIC released a statement warning the investors to only make crypto investments in companies with an Australian market license (AML) or Australian financial services (AFS) license.
Unlicensed Crypto Company Risks
ASIC recognizes the various risks that come with investing in unlicensed crypto companies. It has received multiple reports of Australian citizens suffering significant losses when trading crypto products like options, binary options, futures and leveraged tokens. These losses were attributed to platform outages, unfair liquidations, and extreme leverage that can lead to massive losses.
Investing in unlicensed crypto companies denies you, the investor, the protection provided by licensed entities. Licensed entities have specific investor protection guidelines enacted in the Corporations Act.
While ASIC is aware of most of the unlicensed crypto platforms operating outside the country, they have put various measures to prevent Australians from using them. These platforms have geo-blocking features, removing links and references and displaying warnings and disclosures on their website.
For unlicensed crypto businesses, the commission urges them to register with an external dispute resolution entity like the Australian Financials Complaints Authority. This would allow the Australian investors to launch complaints in case of any issues arising from crypto trading.
Boosting investor protection
The ASIC’s main mandate is to protect consumers. By warning the investors against using unlicensed crypto exchanges they aim to reduce consumer risk and prevent substantial losses.
At the same, ASIC has actively taken various steps to ensure a safer Australian crypto market. The entity aims to ensure the integrity, quality and reputation of the Australian financial system. It has various provisions for financial entities before they can offer any service to consumers. Therefore, by working with a regulated platform, the investor is exposed to fewer risks as they are protected under the Corporations Act.
To provide the best operational environment, ASIC involves the users when coming up with its regulations. For example, it published a public consultation paper in June 2020 seeking market participants’ views on the need to adjust rules for local operators while protecting consumers and promoting market integrity.
ASIC has also highlighted how young investors are vulnerable to social media influencers. The regulator claimed influential online figures make them believe they can make millions and become financially independent without any financial guidance.
Still, there have been concerns on the extent the country has pursued better regulations. Some experts of the crypto industry believe the Australian crypto regulations need to change to make digital currencies a key sector in future.
What should you do when investing in crypto?
To trade crypto securely, you must follow ASIC crypto regulations. Ensure the platform you use is licensed so that you can have the highest protection and invest in legitimate tokens. We highly recommend CoinSpot as it is Australia’s only AUSTRAC-regulated and ISO-certified exchange. You can read our detailed CoinSpot review to learn more about its stringent security measures and premium features.