Joe Longo

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

The chair of Australia’s market regulator has warned that “action will be taken” on financial product issuers who promote risky products to a wide consumer base.

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 toward 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.”

At a panel on cryptocurrency later in the day, Longo said crypto has “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.

ASIC chair troubled by sheer amount of ‘risk-taking’ crypto investors

Australia’s financial services regulator sees the rise in crypto investment during the COVID-19 pandemic as a cause for concern, especially among young and new investors.

The chief of Australia’s financial services regulator Joe Longo has raised the alarm over the sheer amount of people that invested in “unregulated, volatile” crypto assets during the pandemic.

Longo, chairman of the Australian Securities and Investments Commission (ASIC) made the comments in a Thursday media release for its research conducted in November 2021, which looked into investment behavior following the onset of t COVID-19 pandemic, stating:

“We are concerned about the number of people surveyed who reported investing in unregulated, volatile crypto-asset products”

The survey found that crypto was the second most common investment product, with 44% of those surveyed reporting holding it. Of those investors, 25% indicated that crypto assets were the only investment class they were involved in.

Longo said the research highlights “the appeal of crypto-assets to the market,” but that investors may not know what risks they are taking on:

“According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking,’ raising concerns that investors did not understand the risks of this asset class.”

He added that considering there are “limited protections” for investors, the lack of understanding among retail investors makes “a strong case for regulating crypto-assets to better protect investors.”

Opposition party Senator Andrew Bragg agreed with Longo that there is a need for more regulation and for lawmakers to act swiftly to protect investors. He told Cointelegraph:

“The Chair is right to identify this as an issue […] As the Senate Inquiry’s Chair I recommended sweeping reforms to regulate crypto. The government should do some work and do it quickly.”

Australian digital assets lawyer Joni Pirovich, however, told Cointelegraph that there’s been confusion about whether ASIC is properly equipped to oversee token issuers and their tokens. She said:

“It is not that tokens are unregulated, rather that there is a grey area about whether the token issuers are effectively regulated and supervised by regulators such as ASIC.”

Pirovich, who is the principal at Blockchain & Digital Assets – Services + Law, noted that in Australia, token issuance and trading creates an interesting conundrum for policymakers because once tokens are issued and then traded on the open market, it becomes a matter for crypto exchanges:

“There is room for token exchanges to mature and develop best practice standards to better inform their customers too and policy reform should not stifle this.”

The ASIC chair remarks come while crypto trading is still not yet fully regulated in Australia, causing some industry groups to bump heads with representatives at ASIC earlier this year.

The Australian Securities and Investments Commission (ASIC) oversees financial activity in Australia and has assumed regulatory oversight over cryptocurrency investments in the country.

The ASIC survey gathered its data from 1,053 Australian adults at least 18 years old who traded securities, derivatives or crypto between March 2020 and Nov. 2021.