Australia’s market regulator, the Australian Securities and Investments Commission (ASIC) is considering a new tactic in regulating digital currency exchanges and raising the monitoring of initial coin offerings (ICOs) to provide better investor protection.
“Blockchain or distributed ledger technology (DLT) is anticipated to bring significant change to the Australian financial services industry,” ASICsaid in its corporate plan for 2018–2022. It added developments in the technology are seen to raise efficiencies in data reconciliation, settlements and other middle- and back-office functions.
“For example, the Australian Securities Exchange (ASX) is expected to replace its Clearing House Electronic Sub-register System (CHESS) with a DLT solution by 2021,” it added.
The watchdog acknowledges that although the digital assets space still represents a small portion of the global financial system, it is growing at a fast pace and is generating the need for stricter regulatory monitoring.
Between 2018 and 2019, the researchers are expecting ICOs to proliferate globally more than in all previous years combined. It added the monitoring would focus on "monitoring threats of harm from emerging products,” such as ICOs and cryptocurrencies.
According to ASIC, the financial sector is also increasingly using data analytics to address regulatory and compliance requirements more effectively. Global investment in reg tech totaled $591 million from 60 deals during the first half of 2017.
It went on to say, “Due to increasing consumer digital engagement and use of technology by the financial sector, there will be a need for stronger cyber resilience – particularly among firms that provide critical infrastructures, e.g. exchanges and payment systems – to mitigate systemic vulnerabilities. The World Economic Forum acknowledged that cyber attacks and data theft or fraud were among the five most likely global risks in 2018.”
For the period, ASIC pledged to create a new framework for applying the principles for regulating market infrastructure providers to crypto exchanges, while monitoring emerging products, including ICOs and to intervene "where there are poor behavior and potential harm to consumers and investors.”
Last month, Australian Prime Minister Scott Morrison declared that blockchain offers massive opportunities in the financial markets and has the potential to transform Australia’s economy by challenging the existing banking system.