The incoming Labor Government is being urged to rein in the unregulated cryptocurrency industry as a reform priority, as most Australians want crypto trading to have protections similar to buying and selling on the stock market. 

“Choice is hearing from many Australians about financial loss and other harm caused by purchasing crypto assets that were not what they appeared to be,” the spokesman of the consumer advocate group Patrick Veyret said. 

“We’ve seen a number of recent collapses of exchanges where people have lost all of their savings with no ability to get their money back.” 

In a national survey released by Choice, it was found that more than one in nine Australians have bought cryptocurrencies such as Bitcoin or Ethereum in the last year. It was also found that another 11 per cent of Australians are interested in purchasing digital currencies. 

The findings of the survey have shown that, with over 12 per cent of Australians engaged in the crypto industry, there is a high chance for them to experience steep losses if they fled the market during the recent crash. 

There was a general consensus among those that were surveyed that cryptocurrency trading should have consumer protections similar to trading on the stock market. 

Following this, a wishlist was made on possible reforms towards cryptocurrency: 

1. Exchanges that sell or are in control of cryptocurrencies need to be subject to strong legal obligations, including market integrity rules, reporting requirements, and a ban on market manipulation.
2. People should have strong consumer protections when purchasing crypto assets, including the prohibition of misleading and deceptive conduct and unfair contract terms.
3. A “no loopholes” regulatory regime should capture all crypto asset providers and digital assets, including currencies and non-fungible tokens (NFT).

Aside from the aggressive marketing and promotion campaigns by the crypto industry, which are luring Australians into making purchases, there has also been a surge in scams on crypto exchanges.  

In 2021, the Australian Competition and Consumer Commission received more than 10,000 reports of crypto scams from consumers with losses totalling about $129 million. 

Australian exchange MyCryptoWallet collapsed last December, leaving more than 20,000 consumers out of pocket as $21 million evaporated. Meanwhile, Australian exchange ACX.io also suddenly collapsed in January 2019, wiping out $10 million. 

In both these collapses, Choice revealed that consumers have no recourse for compensation. 

Market manipulation of the pricing of digital currencies has also become a growing concern, as the University of Technology, Sydney Business School found over 350 “pump and dump” crypto events on two exchanges in a seven-month period.  

These events were found to have extreme price distortions and abnormally high trading volumes in the millions of dollars. 

It was found that manipulators would often encourage thousands of followers on social media or encrypted message apps to buy the coin, and then sell the overvalued cryptocurrency. This, in turn, forces the crypto coin’s price to fall and causes everyday investors to lose out. 

Under current laws, the Australian Securities and Investment Commission has limited powers to take action against these dangers.  

Choice has made a submission to the new federal government calling for urgent reforms. 

“Australians expect the same level of consumer protection and regulatory oversight for crypto assets as they do with other financial products,” Mr Veyret said. 

With AAP

Eliza Sayon

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Eliza is a content producer and editor at Public Spectrum. She is an experienced writer on topics related to the government and to the public, as well as stories that uplift and improve the community.

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