FPA “Cryptocurrency Rulebook”: Consumer Protection or Restriction?

The Financial Planning Association of Australia (FPA) have recently displayed support in need of a “crypto rule book” framework, which would provide some structure towards regulating crypto exchanges instead of individual crypto assets.

This show of support is in light of an increase of current riskiness in the value of crypto assets, with crypto prices plunging 70% from their all-time highs[1]https://www.forbes.com/sites/jonathanponciano/2022/06/27/crypto-funds-post-record-423-million-outflows-as-bitcoin-plunge-rattles-market/?sh=436b9cd972f6. Australian Regulatory Authorities, like the FPA, like to call this a surging volatile market, so, they recognise there’s an important need for consumer protection from fraud and theft, as well as education and assisted portfolio management. That’s exactly the reason I believe the need of a “crypto rule book” is ever-present – don’t believe me though, believe Visa. In January, the credit card giant unveiled that 24% of small businesses across 9 countries plan to accept cryptocurrencies such as Bitcoin as a form of payment, with 82% pursuing at least one form of digital option[2]https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.18711.html.

Therefore, as the integration of cryptocurrencies with financial institutions (banks etc) evolves, so will the potential, and inherently probability, of scams and thefts upon uneducated consumers.

In a submission to a Treasury review on crypto assets, Ben Marshan (FPA’s Head of Policy Strategy and Innovation), expressed his thoughts that 

“the regulation of a financial product or service should not depend on the technology which underlies the asset”

Ben Marshan

Really, what this means is that besides regulating exchanges, it would be nearly impossible to regulate every single individual asset given the way they’re created and stored.

Going on further, Marshan continues to note that the regulation of crypto exchanges should fall under “the current financial services regime”, where crypto assets can be treated similarly to other financial products, rather than under a new separate legal framework. In all transparency, that sounds like it would remove a lot of complexity in regulating crypto assets. To the point where investing in crypto won’t sound like you’re joining an infamous “crypto-cult” amongst finance enthusiasts, but a legitimate investment option where even financial planners can recommend crypto assets to clients, maybe with specific training in crypto strategies.

However, if you think that’s too good to be true, you’d be right; “At the moment, it’s effectively illegal because there’s no authorisation around crypto assets,” Marshan said, “and because of that financial planners can’t recommend them and can’t get professional indemnity insurance.”

The FPA’s agenda ultimately surrounds simply calling on Australia’s new Labor Government for clearer regulation when it comes to crypto assets, but with this “crypto rule book” still in its drafting phase, no clear deadline as to when it’s finalised (let alone implemented) can be determined. Even with a study showing that Aussies lost a total of $84 million AUD in crypto scams in 2021[3]https://cryptonews.com.au/australians-lost-84-million-in-2021-to-crypto-investment-scams, it’s unlikely the new government will change their stance any time soon, having recently confirmed that crypto is not a foreign currency and would remain subject to capital gains tax. Until then, it’s best of luck to seasoned crypto investors and a weary caution to those looking to begin.

Patrick Diakos – 2022 Publications Team