Australian crypto investors are “on their own” says ASIC chair Joe Longo

Australian Securities & Investments Commission (ASIC) chair Joe Longo warned crypto investors that their investments were not covered by investor protection.

No hand-holding for Australian crypto investors

For better or worse, Australian crypto investors cannot expect any help from the country’s financial authorities. Joe Longo, the ASIC’s chair said in a statement, cautioning investors that they were on their own when it comes to protecting their investments, as crypto assets, being unregulated, did not fall under the ASIC’s definition of a “financial product.” In case of hacks, bankruptcy, or other foul play in the space, the financial watchdog would not provide any assistance. 

Speaking during the AFR’s Super & Wealth Summit, Longo noted how difficult the current situation was for the country’s financial advisers, who cannot provide counselling to their clients. As long as crypto assets remained unregulated, that would continue to be the case, as ASIC was only able to provide guidance on exchange-traded funds linked to crypto assets since these at least constitute financial products traded on licensed exchanges. 

Longo also warned investors to proceed with “great caution” in the crypto space, considering the lack of certified advice. He questioned whether anyone really understood cryptocurrencies: “it is almost an article of faith that no one should invest in something they don’t understand.

Even though Longo was quite apprehensive of cryptocurrencies as an investment vehicle, he acknowledged that they could become more than an alternative form of online gambling, particularly considering announcements like the Commonwealth Bank of Australia offering its clients crypto investments.

Where does that leave Australian crypto investors?

If you’re Australian and interested in crypto assets as an investment or even have done so, you can hardly be blamed for feeling confused at this point. Considering the cacophony of different opinions and breakneck speed of development in the space, it may be worth tallying up the most important developments over the last few weeks:

• ASIC warned banks not to proceed with “debanking” crypto companies, as this constitutes anti-competitive behaviour.
• ASIC also released guidelines to crypto exchange-traded products in an attempt to bring regulatory clarity.
• The first Australian crypto ETF set new records on its first day of trading.

Add to that the most recent news by CBA and the cautionary words by Mr.Longo, you may be wondering: even if ASIC is pro-crypto one day and anti-crypto the next day, how am I as a retail investor to know what is best?

Unfortunately, there is no straightforward answer to this. As the back-and-forth by ASIC and its senior executives indicates, crypto beats even the most experienced financial professionals. The novelty of the technology and its wide array of possible use cases make regulation complex, as professionals are struggling to understand what can and cannot or what should and should not be regulated. 

Retail investors may have to adjust and abandon old investment premises like having financial authorities as a backstop in case something goes wrong. Crypto is bringing about the age of self-responsibility in investing and, depending on who you ask, that may not be such a bad thing.