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Monday, May 27, 2024

Making Crypto Safer for Consumers

Crypto means digital assets, including cryptocurrencies, coins or tokens, which digitally represent your ownership of a value or rights to something. They may or may not be backed by physical assets.

It is a high-risk investment, and the value of crypto is volatile, often fluctuating by vast amounts within a short period.

The federal government is acting to ensure the regulation of crypto assets protects consumers and positions our economy to take advantage of new digital products and services.

Unsustainable business models used by some crypto asset companies have exposed consumers.

The federal government has created a multi-stage approach to ensure that consumers are adequately protected, and true innovation can flourish. 

The multi-stage approach:

  • strengthening enforcement;
  • bolstering consumer protection; and
  • establishing a framework for reform.

Strengthening Enforcement Action

Australia’s regulators are strengthening their focus on crypto asset providers to ensure they meet their obligations to Australian consumers.

The Australian Securities & Investments Commission (ASIC) is increasing its crypto team’s size and upping enforcement measures.

The regulator will take legal action when it identifies crypto offerings being marketed without the appropriate credit or financial services licence. ASIC will pay particular attention to ensuring that consumer risks are appropriately disclosed.

The Australian Competition and Consumer Commission (ACCC) is also stepping up efforts to prevent scams involving crypto assets. The National Anti‑Scams Centre, located within the ACCC, will facilitate real‑time data sharing and the coordinated prevention and disruption of scams.

In a report published last year, the ACCC’s Scamwatch noted that more scammers are seeking payment via crypto, with losses reported via this payment method totalling $221 million in 2022, a 162 per cent increase from the earlier.

AUSTRAC also regulates digital currency exchanges under the Anti-Money Laundering and Counter-Terrorism Financing Act to prevent and detect money laundering and terrorism financing.

Bolstering Consumer Protection

The government will reform the licensing and custody of crypto assets, particularly for the subset that currently fall outside the financial services regulatory framework. They will establish a set of obligations and operational standards for crypto asset service providers to ensure they adequately safe‑keep assets for customers.

This will ensure consumers are protected from avoidable business failures or from the misuse of their assets by service providers.

Establishing a Framework for Crypto Reform

While immediate action is being taken to protect consumers, additional work needs to be done to understand the risks and opportunities crypto poses for the future, beginning with the Treasury’s token mapping exercise. This will enable the government and stakeholders to focus on regulatory gaps and identify and control emerging risks.

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