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And it says digital assets designed to make users untraceable should be banned.
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Crypto industry cannot be law unto itself: CPA Australia
31 May 2022
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9 minute read
The crypto industry cannot be allowed to self-regulate and a “blanket approach” to bringing all crypto assets under financial product regulation has too many drawbacks, CPA Australia said.
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Crypto assets can be both financial and non-financial products it said, and some would fail to qualify as assets under an accounting definition.
“Financial services regulation is applicable to financial crypto assets but unsuitable for non-financial crypto assets,” said CPA Australia’s executive general manager, policy and advocacy, Dr Gary Pflugrath.
“We believe that regulatory certainty for crypto assets that are considered financial products will benefit crypto investors and the industry alike.
“The creation of a proportionate regulatory framework for crypto assets and crypto asset secondary service providers (CASSPrs) is a necessary step to reduce arbitrage and to ensure adequate protection of the interests of investors, businesses and the public.”
The professional body outlined its position in a submission to Treasury on CASSPrs.
Treasury has outlined its policy objectives to underpin a licensing regime for CASSPrs, which focused on minimising risks to consumers from operational, custodial and financial risks facing the use of CASSPrs.
Dr Pflugrath said he recommended ensuring that investors and consumers benefit from equivalent protections as they would expect when investing in financial products.
But he said there were issues with the term CASSPrs and it would be preferable to adopt VASP – or virtual asset service provider, and there were also problems with the definition of “digital asset”.
“In Australian Accounting Standards an asset is defined as ‘a present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits,’” Dr Pflugrath said.
“If the proposal to develop one definition for crypto assets to apply across all Australian regulatory frameworks is pursued, the proposed crypto asset definition needs to be aligned with the definition of an ‘asset’ under AAS.”
CPA Australia also recommends a temporary ban on advice that takes into account an investor’s personal circumstances should be implemented until the government responds to the recommendations of the Quality of Advice Review.
And it said untraceable crypto assets should be banned to prevent money laundering.
“The existence of blockchains and crypto assets specifically designed to ensure secrecy over the sender, the receiver and the amount transferred, create almost risk-free ways of laundering money originating from criminal activities, or hiding the financing of terrorist organisations. Australian regulators must find ways to ban crypto assets designed to make users untraceable,” Dr Pflugrath said.
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