The Australian Securities and Investments Commission (ASIC) has warned Australians of investing in crypto-asset-related financial products, such as options and futures, through unlicensed entities for its lack of protection.
ASIC recommends investors to only deal with entities that hold an Australian financial services (AFS) license or an Australian market license (AML).
Financial services advisors or dealers in Australia are required to be authorized by ASIC. Financial products include derivatives such as options, futures, leveraged tokens, and binary options.
The sale of binary options to retail clients was recently banned in Australia under an order that will remain in force for 18 months, after which it may be extended or made permanent.
ASIC has received several complaints from Australian residents who have experienced significant losses due to excessive leverage, platform outages, or unfair liquidations using unlicensed platforms to trade crypto-asset-related financial products, such as options and futures.
While some unlicensed entities have taken steps to prevent Australian clients from accessing their services – including warnings and disclosures as well as geo-blocking – many continue to willfully engage with retail investors from Australia.
“Dealing with licensed entities ensures that you have the benefit of specific obligations and investor protections imposed on these entities under the Corporations Act, that would not be applicable to an unlicensed provider”, the regulator explained. “If an entity is unlicensed, you are taking a risk that you will not be afforded with the investor protections required of licensed providers”.
ASIC has taken strict measures as of late to curb the losses from inexperienced traders in the face of leveraged markets. The agency lowered the leverage cap for CFD products in Australia, a move that took effect in late March 2021. Binary options were outright banned.
Firms had to adopt European-like restrictions on such financial products. Furthermore, online brokerages offering CFDs will no longer be able to use bonuses and other non-monetary incentives to try and attract new traders.
The significant drop in available leverage being offered to clients following the implementation of the restrictions once again brings up the topic of “going offshore”.
Indeed quite a few AU registered online brokerages have already made the decision to onboard non-AU customers to island jurisdictions in order to maintain the same trading parameters for customers who want leveraged trading products.
In recent weeks, financial watchdogs across the world began a crack down on cryptocurrency trading platforms which were targeting their jurisdictions without proper licenses.