Crypto Should be Recognized as Financial Products, Says Australian Minister
Among the many things that are debated about cryptocurrency, there is endless discussion about what exactly they are. Are they a form of currency? Are they securities? Are they a bit of both? These are questions that have floored both crypto users and regulators alike over the years.
One Australian regulator, however, has advocated that cryptos be seen as and treated as financial instruments. Stephen Jones, an Australian financial services minister, touched on the effects of last year’s FTX collapse and said that this calls for better regulation of cryptocurrency but not necessarily separate regulation.
Cryptos as Financial Instruments
In a recent interview, Jones noted that it was time for cryptos to be given the same treatment as ‘traditional’ financial instruments.
“I don’t want to pre-judge the outcomes of the consultation process we are about to embark on. But I start from the position that if it looks like a duck, walks like a duck and sounds like a duck then it should be treated like one,” he said, noting that he does not support creating a whole new category for regulating cryptos.
This is a position that is supported by both the Australian Securities and Investments Commission (ASIC) and the Commonwealth Bank, one of the biggest banks in Australia. At the same time, groups like Blockchain Australia have argued that if this regulatory classification is made, investments in the crypto space and jobs might end up being threatened. But Jones begs to differ.
As he puts it, many cryptos are already acting like financial products and as such, it makes sense that they are treated like them.
“Other coins or other tokens are being essentially used as a store of value for investment and speculation. [There is a] good argument that they should be treated like a financial product,” he says.
This is similar to the sentiments shared by UK regulators in the wake of the FTX collapse. As some put it, better regulation of the crypto sector could have prevented FTX from collapsing the way it did and causing billions of dollars in losses that are still being tallied to this day. But the current classification of cryptocurrencies and their treatment by regulators means that the industry goes underregulated.
And misbehaviour within the crypto industry thrives most in the absence of regulation. But if, as Jones suggests, cryptos are treated like any other financial product, they will be subject to the same intense scrutiny and perhaps fewer FTX-type scandals will occur.
The State of Crypto
It seems that we will not get any resolution about the proper legal classification for crypto for a while. While some are adamant that it is a financial product and should be treated as such, others see it as a medium of exchange or something else. The issue, however, is that regardless of what decision regulators take, there will be a ripple effect. Whether this means a better oversight for the industry or its collapse, however, is yet to be seen.