CHOICE, an Australian consumer advocacy group, has called on the federal government to provide better protection for crypto investors while submitting a proposed regulatory framework for cryptocurrency exchanges operating in the country.
It has been reported that the regulatory framework was submitted in response to the federal Treasury’s consultation paper for crypto asset secondary service providers (CASSPs), defined as firms providing custodial crypto wallets and exchange services.
“As it stands, enforceable protections in the unregulated cryptocurrency market are somewhere between negligible and non-existent.”
However, outlining four main areas in its framework, the group called for a single definition of crypto for better regulation, a license for exchanges in line with current financial licensing, and for them to be bound by consumer protection laws to prohibit things like misleading advertising.
The report said that CHOICE said crypto exchanges need to enact measures for preventing fraudulent payments and reimburse customers when they occur. The Australian Securities and Investments Commission (ASIC), the chief financial services regulator in the country, has previously warned that cryptocurrency is not recognized as a financial product.
Patrick Veyret, the Senior Policy Adviser of CHOICE, said:
“The crypto market is booming, but our laws are lagging behind, more and more Australians are purchasing crypto assets such as Bitcoin and Ethereum without adequate consumer protections.”
Veyret added that there are instances where “people have lost all of their savings with no ability to get their money back,” citing the recent fall of Terra as a “clear example of the extreme volatility in this unregulated market.”
Likewise, according to an ongoing survey conducted by CHOICE, only around one in ten Australians purchased crypto such as Bitcoin (BTC) or Ether (ETH) in the past year, and 71% who signaled an interest in the crypto market didn’t purchase due to concerns of price volatility and scams.
CHOICE reported that a separate survey of 1,034 Australians conducted in March and April revealed over half of respondents didn’t know if trading crypto came with consumer protections like those which apply to the stock market. Around the same amount of people (50%) believed such consumer protections for crypto trading should be enacted.
As reported in August 2021, the first six months of that year saw investment scams in Australia cost investors more than $50 million, with crypto scams netting bad actors over $25 million — more than half of the reported losses. A more recent report in March by CHOICE found the main competition regulator, the Australian Competition and Consumer Commission (ACCC), confirmed nearly 10,500 reports of cryptocurrency scams in 2021, with losses of around $92.6 million for the year.
The government is taking action on crypto despite the current lack of regulations. In March, the ACCC took Meta to court for publishing scam celebrity crypto ads. Furthermore, the ACCC has stated it wants to support the crypto industry but notes challenges with regulating such innovative technologies.
Thus, Veyret concluded:
“The new federal government needs to rein in the unregulated crypto industry as one of its financial services reform priorities, Australians expect the same level of consumer protection and regulatory oversight for crypto assets as they do with other financial products.”