Presented by Jones Partners

Cryptocurrency remains one of the most revolutionary, volatile, elusive, and misunderstood markets in the modern world. For those unfamiliar, cryptocurrency is a form of digital currency. Trading platforms allow for digital currency to be exchanged for other types of tokens or cash. Tokens can be asset backed, used as payment, or have underlying utility (practical application).

 In November of 2022, FTX Trading Ltd (Future Exchange), one of the world’s largest crypto trading platforms, filed for bankruptcy in the US.  This was triggered by a severe run of customers trading in tokens for cash, fuelled by rumours of extensive unauthorised transactions. This run exposed a severe liquidity shortage, and the underlying insolvency of the company. Financial institutions were unwilling to lend them the cash to repay customers. The Australian trading platform subsidiaries of FTX were placed into voluntary administration shortly after the bankruptcy was filed in America.

A significant point of controversy was that FTX Australia held an AFSL (Australian Financial Service Licence) issued by ASIC, which was revoked shorty after they entered administration. Many professionals, customers and lawmakers have highlighted their concern for this, claiming it provided a false sense of security for customers engaging in trading activities on the platform. An estimated 30,000 Australians remain creditors of FTX and subsidiaries.

There is a severe shortage of educated individuals who understand the complexity of cryptocurrency. Its decentralised nature, extreme volatility, and various functions make it a highly misunderstood market, in desperate need of reform. In September 2022, Liberal Senator Andrew Bragg put forward the Digital Assets (Market Regulation) Bill to parliament. This bill proposed increased protections for customers, as well as licence and disclosure requirements.

The current government position on this remains uncertain, however there is clearly a need for greater clarity in this area. Despite its unstable nature, this innovative technology is already transforming the way our financial systems operate. It is important that Australia does not fall behind the rest of the world in digital asset regulation.

Jones Partners is committed to remaining current on developments in this area. Give us a call on  +61 2 9251 5222  or send us an email for information about upcoming seminars with leading experts from a variety of industries and fields.