The crypto marketplace currently poses significant risk to consumers and there is a pressing need for adequate protections and safeguards.
Consumer Action applauds the Government for its commitment “to improving the way Australia’s regulatory system manages crypto assets –to provide greater protections for consumers and keep up with technological developments” and for recognising the need to review the regulatory framework to address the growing risks to consumers of the crypto ecosystem.
Government intervention in some form in the crypto marketplace is vital, and it needs to have a significant impact upon current industry practices.
We note that the consulation paper has detailed consumer harms, particularly where consumers use crypto for speculative investment. We can confirm, through our casework (case studies included below), that consumers have been using crypto primarily for speculative, high-risk investment takin to gambling and have experienced major financial losses for doing so.
While dressed as an investment opportunity, crypto is not well understood and is regularly used to deceive unsophisticated consumers and facilitate scams. The absence of a ban or regulation in the crypto space makes Australia an extremely attractive playground for scammers.
As detailed below, we consider the risk posed to warrant the introduction of universal regulation across the sector, regardless of the nature of the crypto assets involved. Leaving aspects of the crypto market open to unlicensed players will leave obvious loopholes for scammers to continue operating in. Our view is that unless banned, any business involved in crypto investing, trading or advice in the retail market must meet strict licensing obligations.
We are concerned that regulating crypto will amount to public recognition and endorsement of its legitimacy by Government. Accordingly, if proceeding with regulation the Government needs to meaningfully reduce the risks involved in the marketplace by applying significant obligations on all businesses operating in the sector, including in relation to detecting and preventing the rapidly increasing problem of scams. Any regulation should apply universally across crypto where possible as a starting point, to reduce complexity for consumers and ensure safety. It should also include restrictions on advertising and marketing, again, to protect consumers from scams. Major differences should not exist between the consumer protections afforded to people based upon the differences between crypto assets and tokens explored in the Consultation Paper, as most consumers will be unaware of these differences.
Read the full submission (PDF).