In a submission to the federal government, it has put forward a number of recommendations to formulate a proposed framework of regulation to protect consumers.
These include a single definition for crypto assets for the purposes of regulation; a licensing regime for all exchanges that sell or are in control of crypto assets in line with the Australian Financial Services Licence regime; crypto exchanges to be bound by consumer protection provisions including a prohibition on misleading and deceptive conduct, unconscionable conduct, and unfair contract terms; and crypto exchanges to have measures in place to prevent fraudulent payments and to reimburse consumers when they occur.
According to its own research CHOICE data showed that about one in 10 Australians have purchased a cryptocurrency over the past 12 months, but many more have suffered at the hands of scammers.
CHOICE is calling for exchanges that sell or are in control of crypto assets to be subject to the same consumer protection obligations as the traditional financial services sector.
In its nationally representative CHOICE Consumer Pulse survey of 1,034 Australians in March and April it was also revealed that more than half of Australians don’t know whether cryptocurrency trading comes with consumer protections similar to those that apply to the stock market. About the same number of people believe that such protections should be in place.
Earlier this year, CHOICE reported that Australians had lost $99 million to crypto investment scams in 2021 (the total loss for crypto scams in general was $129 million) – the country’s costliest scam at the time.
In light of the data, which showed the increasing interest in crypto trading, the rise in aggressive marketing and the huge growth in scams, CHOICE is urgently calling for better regulation.
“The crypto market is booming, but our laws are lagging behind,” said CHOICE senior policy adviser Patrick Veyret. “More and more Australians are purchasing crypto assets such as bitcoin and etherum without adequate consumer protections.”
CHOICE said it is hearing from many Australians about financial loss and other harm caused by purchasing crypto assets that were not what they appeared to be.
“There’s been a number of recent collapses of exchanges where people have lost all of their savings with no ability to get their money back,” Mr Veyret said. “The recent collapse of the supposedly ‘stablecoin’ terraUSD (recently relaunched as luna) is a clear example of the extreme volatility in this unregulated market.
“CHOICE has also seen a huge surge in scams on crypto exchanges. Our research shows that two in five people who are interested in crypto are not investing due to the risk of scams.”
