Australia Targets Crypto Derivatives to Curb $325M in Retail Losses

ASIC Proposes Expanded Leverage Restrictions

Australia’s securities regulator, the Australian Securities and Investments Commission (ASIC), is moving to close a loophole that allows crypto-settled derivatives to operate with fewer restrictions than traditional contracts-for-difference (CFDs). The proposal, announced October 12, comes after data revealed significant losses among retail investors trading these products.

ASIC found that 68% of retail CFD clients lost money during the 2023–24 financial year, totaling over A$458 million (approximately $325 million USD). This figure includes A$73 million in fees. The regulator is seeking to extend existing CFD rules to cover qualifying derivatives settled through digital assets, eliminating a distinction that has allowed economically similar products to face different leverage limits.

Current Leverage Limits & Proposed Changes

Currently, CFDs referencing cryptocurrencies are capped at 2:1 leverage, requiring investors to provide at least 50% margin. Other assets have varying limits. ASIC’s proposed changes would apply restrictions based on the derivative’s underlying exposure, not simply whether it settles in crypto. Some fixed-expiry crypto futures and options would remain outside the scope of the new rules.

The regulator also aims to tighten margin calculations, preventing brokers from offsetting customer positions to reduce collateral requirements. This follows an investigation that led to 28 issuers refunding over A$36 million to affected customers. Further changes target CFDs linked to options, where losses were particularly high – 85% of retail clients lost money trading these products in 2023-24.

Impact and Consultation

ASIC Commissioner Alan Kirkland highlighted that existing restrictions had already reduced investor harm, with retail losses declining 91% in the six months following their implementation in March 2021. The proposed extension of these protections, potentially until 2037, is now subject to industry consultation. ASIC is seeking feedback from brokers, platforms, and consumer groups by November 9 regarding the potential impact and compliance costs of the changes.

Source: CryptoSlate