The Australian Securities and Investment Commission (ASIC) is weighing up the risks of allowing more crypto-based assets into Australia’s financial system, but it's wary of the lack of regulation and legislation in the area.

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Speaking to the House of Representatives’ standing committee on economics this week, ASIC chair Joseph Longo emphasised that ASIC’s powers under the current Corporations Act are “very” limited.

“The legal framework around regulation and crypto doesn’t leave us too many options,” Mr Longo admitted.

He said that there are still significant policy issues that need to be resolved.

“As far as crypto assets in general are concerned, the Corporations Act as it's presently framed is not set up to deal with that particular asset class,” Mr Londo told the committee.

“It will require law reform,” he suggested.

Mr Longo told committee members that the securities watchdog was happy to work with the government on what that reform might look like, but is concerned by the rapid rise of cryptocurrencies and other crypto-assets.

“As far as [crypto-linked] ETFs are concerned, that is a product we are working on, and we will be announcing the result of our consultation with a view to seeing whether an instrument along the lines you’ve described can be tradable or trading within a reasonable amount of time,” Mr Longo said.

Asked to clarify further on what a reasonable amount of time looks like, Mr Longo said that ASIC hopes to make an announcement about where they’ve landed on the issue “sometime in the next couple of months.”

Mr Longo added that ASIC has been “quite open” about the potential issues that needed to be addressed before these products can trade within Australia’s financial ecosystem.

Back in June, the regulator said that crypto-linked exchange traded funds (ETFs) presented a “real risk of harm” to consumers and markets.

Mr Longo’s comments come several months after the regulator consulted the industry on whether it should allow crypto-based exchange-traded funds access to the Australian Securities Exchange.

Earlier this year, ASIC suggested that “a principles-based approach ought to be used to determine whether a crypto-asset is capable of being an appropriate underlying asset for an ETP to support the fair, orderly and transparent operation of a licensed financial market.”

At that point in time, they said, “the only crypto-assets that are likely to satisfy these factors are bitcoin (BTC) and ether (ETH).”

Speaking to sister brand InvestorDaily earlier this year, Apollo Capital analyst Matt Harcourt said that ASIC’s open discussion around crypto-assets as underlying assets was a promising step towards achieving regulatory clarity on the topic.

According to him, “the opportunity is big as a publicly traded ETP will give unsophisticated retail investors access to crypto assets in a familiar product structure, the same is true for institutions”.