ASIC issues crypto warning as Joe Longo backs inquiry into ‘highly volatile and inherently risky’ assets

ASIC has issued a plea for investors to understand the dangers of crypto as it pledges to step-up surveillance on the sector.

Australia’s peak financial regulator has warned cryptocurrency investors “do not fully understand what they’re investing in”, warning the “very significant risks” behind the assets concern him, as he backed the Federal government’s reform program to regulate the asset class.

Australian Securities & Investments Commission chairman Joe Longo said the regulator would be stepping up its efforts around cryptocurrency after a string of company collapses and market failures that have blown up investments.

“ASIC’S essential warning to consumers considering crypto assets is this: they are highly volatile, inherently risky, and complex,” he said.

Speaking at the Committee for Economic Development of Australia on Tuesday, Mr Longo said ASIC would continue to prioritise cryptocurrency surveillance and would support the development of an “effective regulatory framework and greater regulatory clarity” for the assets.

“We will continue to take enforcement action to disrupt and deter harmful products already within ASIC’s jurisdiction,” he said.

“This includes those that mimic traditional products or seek to circumvent regulation.”

This comes after the federal government announced on Monday it would kick off consultation with industry and regulators as part of a review of the crypto sector.

Treasurer Jim Chalmers and Assistant Competition, Charities and Treasury minister Andrew Leigh said the government would prioritise “token mapping” as part of its review, to identify how crypto assets “should be regulated”.

ASIC chairman Joe Longo has issued a warning to investors about ‘highly volatile’ cryptocurrency. Picture: David Geraghty

Mr Longo also said ASIC was collaborating with “domestic and international peers” to police cryptocurrency schemes and was co-operating with them to set standards.

“The crypto ecosystem does not observe borders or the jurisdiction of any single Australian regulator,” he said.

Mr Longo’s remarks come after ASIC published its corporate plan on Monday, revealing the regulator’s priorities for the next four years.

The plan noted ASIC was concerned with technology risks as one of the regulator’s four key external priorities.

The plan noted ASIC intended to supervise and assess product disclosure statements around crypto products and implement a regulatory model for exchange-traded products that have underlying crypto investments.

Mr Longo said ASIC would look at its regulatory guidance and provide “a more detailed regulatory timetable” as part of its new four-year plan.

He also said ASIC would review its stakeholder engagement approach to move it to a more “regular and multichannel engagement”.

ASIC is also prioritising scams and frauds which have sought to target Australians.

Mr Longo noted ASIC had recently met with Google “to discuss advertising of financial products”.

Google recently announced it would require advertisers promoting financial products to prove they are licensed by ASIC or exempt from the licensing regime.

Mr Longo also warned ASIC would step up its enforcement action around “greenwashing”, the overstatement of environmental credentials by firms and companies, noting the regulator would ensure businesses “comply with the law”.

“The information must be useful and accurate for investors,” he said.

“If you make net zero claims, you must have substance behind those claims. Aspiration on its own is not enough – the bar is set much higher.”