MEDIA RELEASE: The Financial Planning Association of Australia (FPA) says it supports a regulatory framework for crypto assets provided it’s consistent with their equivalent non-crypto versions.
In a submission to Treasury, FPA Head of Policy, Strategy and Innovation, Ben Marshan says the regulation of a financial product or service should not 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 [ETH] 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,” Marshan says.
“Ensuring consistency will reduce confusion for Australian investors and financial service providers.”
The FPA says there is an urgent need to better protect consumers, both from the risks of fraud and theft of assets, but also from an education and portfolio construction perspective.
Given the nature of blockchains and the assets which sit on them, the FPA says the only available mechanism for providing this protection within the Australian financial services industry is for the protections to sit on the secondary service provider layer.
However, the FPA does not support regulating crypto asset secondary service providers outside of the current financial services regulatory regime. Marshan says such a regime creates 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,” he says.
“Secondly, it would require existing financial service licensees to apply for and hold a separate type of license adding to cost and regulatory duplication.
“While the ALRC Review of the Corporations Act has identified the difficulty of regulating financial services and products due to its complexity, creating further regulatory duplication will only increase the cost to access financial services and products by consumers,” Marshan says.
“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.”
In addition, the FPA calls for greater engagement between regulators and market participants, including with new or non-traditional market participants such as social media influencers, to identify and distinguish genuine players who want to do the right thing from those who are using social media to manipulate, misinform or worse – to promote a scam or commit fraud.
“The FPA supports the work of Australian Securities and Investment Commission which issued information sheet 269 to identify what social media influencers practically and clearly can and cannot do, illustrated with examples,” Marshan says.
“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.
“These technology platform providers can also help regulators by suspending or removing social media influencers who have broken the law by providing financial advice when not licensed.”