The Financial Planning Association wants a regulatory framework for crypto assets – provided it’s consistent with equivalent non-crypto versions.
In a submission to a Treasury review on crypto assets, FPA head of policy Ben Marshan stated the regulation of a financial product or service shouldn’t depend on the technology which underlies the asset.
“To this point, investment in crypto assets is as much in relation to the asset itself, such as an ether coin or a non-fungible token (NFT), as a bet on the sustainability of the technology platform supporting the asset, for example the Ethereum blockchain,” the submission states.
However, the FPA does not support regulating crypto asset secondary service providers outside of the current financial services regulatory regime which Marshan said would create two issues.
“Firstly, it would create an alternate, duplicate regulatory regime to regulate what at the core is the purchase and holding of a financial asset to either retail or wholesale investors. Secondly, it would require existing financial service licensees to apply for and hold a separate type of license adding to cost and regulatory duplication.”
Marshan said while the ALRC Review of the Corporation Act identified the difficulty of regulating financial services and products due to its complexity, creating further regulatory duplication will only further increase consumer costs.
However, he pointed the ALRC’s proposed rules book approach as a potential solution.
“To solve for this, ALRC’s recommendation that specific financial services be regulated through the creation of a rules book is a good one. Given the emerging nature and nimble approach needed to regulate this rapidly developing space, this concept makes sense.”
Regulators have struggled to get reliable information to make regulator decisions on crypto assets.
Consumer needs
The association noted there is an important need for consumer protection not only from fraud and theft but also from an education and portfolio construction perspective.
The FPA is also calling on better engagement between regulators and market participants – including “non-traditional” ones like finfluencers to identify illegitimate players in the industry.
Marshan said the association supported ASIC’s info sheet 269 which outlines what finfluencers are allowed to do in the industry. ASIC stated it would crack down on finfluencers with threats of fines and jail time for breaking financial services law.
“There is also a role for ASIC to engage technology platform providers such as Google, Facebook, Twitter to enter into cooperation agreements that would allow regulators and technology platforms to work together to prevent or shut down a scam or fraud being promoted on an online platform,” Marshan said.
