Unlike stockbrokers, who must hold an Australian Financial Service Licence to promote investments, anybody can market cryptocurrency investments via social media channels and raise money with little more than a good reputation, the Committee on Australia as a Technology and Financial Centre heard on Friday.
“Insider trading or market misconduct prohibitions in Australia are tied to it being a financial product, but the characteristics of digital assets mean they are not defined as a financial product,” said Paul Derham, managing partner at Holley Nethercote Lawyers.
During the hearing, Mr Derham pointed to a US-based crypto influencer who promotes crypto tips to his 2.5 million Twitter followers, despite his lack of financial qualifications.
“Who knows if he was paid to recommend those coins, who knows if he loaded a file of his own coins before releasing his video, essentially insider trading the inevitable price rise generated by his post?” Mr Derham said.
As it stands, ASIC provides guidance on categories of managed investment schemes, derivatives, non-cash payments or securities.
But legal experts warn the characteristics of cryptocurrencies – their changeable natures, their shifting