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

Australia’s financial services and markets regulator has issued another glaring warning towards issuers of crypto-based financial products, particularly those inappropriately marketing high-risk products.

Joe Longo, chair of the Australian Securities and Investment Commission (ASIC) in an opening speech at the ASIC annual forum on Nov. 3 local time said it will use current laws to police “risky and complex products” to protect consumers.

He added, “crypto and the crypto ecosystem continue to pose challenges and opportunities for regulators and policymakers alike” saying the risks with crypto investing are “often opaque” with the assets being “highly volatile, inherently risky, and complex.”

While his warning encompassed non-crypto-focused firms too, Longo took particular aim at issuers of crypto-based financial products, putting them on notice if their offering doesn’t pass ASICs muster:

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

 We’re seeing issuers promoting high-risk products as appropriate investments that will make up a significant portion of an individual consumer’s investment portfolio. This will not be tolerated and action will be taken," he warned.

Longo said ASIC is continuing to use rules enacted in Oct. 2021 for financial products to have stricter target market determinations (TMDs) and disclosures of significant dealings outside of those TMDs to police “risky, volatile, and complex products.”

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

Longo took a seemingly softer approach towards blockchain and asset tokenization technology, noting it as having the potential to “provide new solutions to longstanding problems” and “revolutionize the way we do commerce.”

He noted the regulators' work supporting the pilot of a local Central Bank Digital Currency (CBDC) saying ASIC is monitoring developments 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 misleading promotion of crypto-asset financial products, is within our sights.”

Related: Saying ‘not financial advice’ won’t keep you out of jail: Crypto lawyers

At a panel on cryptocurrency later in the day, Longo said crypto “the 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 for consumers is that this is a risky, speculative, and poorly understood activity, which has to be distinguished from the innovation of the underlying technology.”

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

He spoke on the three “cornerstones” of ASICs crypto regulation strategy which are supporting the development of a regulatory framework and greater legal clarity for crypto and gathering information from international peers to inform the government on an effective legal framework along with continuing to disrupt and deter scams involving crypto.