Google AI


Modern Australian

How FTX Australia was able to get away with claiming it was 'ASIC-licenced'

  • Written by: Pamela Hanrahan, Professor of Commercial Law and Regulation, UNSW Business School, UNSW Sydney
How FTX Australia was able to get away with claiming it was 'ASIC-licenced'

When cryptocurrency exchange FTX Group collapsed in the Bahamas last month, its local subsidiaries FTX Australia Pty Ltd and FTX Express Pty Ltd fell over too.

The Australian companies were placed into administration on November 11 and within days the Australian Securities and Investments Commission (ASIC) had suspended the Australian financial service licence FTX Australia had held since March 2022.

The fact that FTX Australia had an Australian financial service came as a surprise to some people, who had wrongly assumed everything crypto-related was beyond the reach of Australia’s regulators.

It also raised questions – including for Assistant Treasurer Stephen Jones – about how FTX Australia managed to acquire its Australian financial services licence, and how ASIC seemed to have missed the chance to intervene sooner.

And it draws wider attention to the 20-year-old licensing system and what an Australian financial service actually means for the firms that have them.

Licensed to do what, precisely?

FTX Trading Limited When FTX commenced operations in Australia this year, its media release was headed: “FTX launches fully registered and licensed Australian operations”. But what exactly was it licensed to do? The Australian financial service (AFS) licensing regime in place since the late 1990s authorises each firm to do specified things, in relation to specified financial products, for specified clients. Each firm’s licence is different, and what is required by ASIC is different depending on what the firm is authorised to do. FTX Australia’s licence authorised it to deal in, make a market for, and provide general advice relating to derivatives and foreign exchange contracts to retail and wholesale clients. That’s it. Note that crypto-assets are not specified, nor is running a crypto-asset exchange. The jury is still out globally on whether crypto-assets (as distinct from investments derived from crypto-assets) are financial products at all. It is possible to think of them as like gold bullion or fine art – or pet rocks – where the asset itself is not a financial product, but a financial product might be constructed from it. If a cryptocurrency is not a financial product, then licensing laws can’t apply, which might explain why one of the two firms set up in Australia – FTX Express, which operated the crypto-exchange – was not AFS licensed. Read more: 'I thought crypto exchanges were safe': the lesson in FTX's collapse The lesson is that knowing a firm has an AFS licence only takes you so far, and often not very far at all. Unless you check the specific authorisations, there’s no way of knowing how little the firm you are dealing with is licensed to do. And ASIC-regulation doesn’t involve prudential regulation, which is directed at the stability of the company itself, ensuring among other things that it should be able to meet its financial commitments under reasonable circumstances. Prudential regulation is the job of the Australian Prudential Regulation Authority, which regulated neither FTX Australia nor FTX Express. Licences for sale FTX Australia’s ASIC licence was originally granted to someone else entirely back in 2008. A series of takeovers meant it passed through a number of hands until it ended up with FTX in March this year. While an original applicant has to satisfy rigorous checks, this hasn’t always been the case for subsequent purchasers. ASIC has known for years that its ASF licences were ending up in new hands when companies were bought and sold. In 2017, it asked the government’s ASIC Enforcement Review Taskforce to recommend changes to the law that would allow it to revisit an AFS licence when its owners changed. The change that was eventually legislated in 2020 only required licensees to notify ASIC when a licence changed hands, within 30 days. It did not require ASIC to approve the change in control. Limited ASIC powers ASIC is able to inquire further to determine whether there is reason to believe a new licensee was likely to contravene its statutory obligations or is “fit and proper” – but it is not required to do so. If it finds either that the licensee is likely to contravene its obligations or that it is not fit and proper, it is able to suspend or cancel the licence after giving the new owners a fair hearing. Read more: How 'bad credit' lender Cigno has dodged ASIC's grasp But such inquiries have not become routine. Most of the (hundreds of) licensee purchases notified each year seem to go through to the keeper, as did FTX’s. Even if ASIC had reviewed FTX’s purchase of the licence in March 2022, it might well have found no grounds to revoke it, given the very limited range of activities it authorised. The FTX collapse may result in ASIC changing its attitude to change-of-control transactions involving AFS licensees, for which it might need more resources. But even if that happens, clients would still be well advised to take care to understand exactly what “AFS licensed” really means. Authors: Pamela Hanrahan, Professor of Commercial Law and Regulation, UNSW Business School, UNSW Sydney

Read more https://theconversation.com/how-ftx-australia-was-able-to-get-away-with-claiming-it-was-asic-licenced-196361

What Are the Benefits of Renovating an Older Home in Sydney?

Sydney has plenty of character homes, from Federation cottages to mid-century brick homes. Renovating rather than rebuilding can preserve what makes t...

Pool and Deck Design: How to Plan the Perfect Outdoor Living Space for Your Sydney Home

For many Australians, the backyard is where life happens. Summer barbecues, weekend swims and long evenings outdoors are all part of the lifestyle, ...

Is Solar Pool Heating Worth It? What Sydney Homeowners Should Know

There's nothing quite like a backyard pool on a hot Sydney day. But once autumn rolls in, many pools sit unused for months because the water is simp...

Planning a Luxury House Move: A Week-by-Week Timeline for Prestige Sydney Homes

Selling or buying a prestige home is a major milestone. Whether it's a waterfront residence in Birchgrove, a grand Federation home in Haberfield or ...

Downsizing or Upgrading Your Caravan? Here's How to Sell It Without the Hassle

Selling a caravan can feel like a major task, especially when you are unsure about its value, paperwork, or how to find a buyer. Whether you are dow...

The Best Overseas Adventure Holidays for Australians Who Love the Outdoors

Australia offers no shortage of incredible outdoor experiences, but sometimes the best way to satisfy your sense of adventure is to head overseas. A...

Cape Town Wine Shuttle: Winelands Tasting & Tours

Embark on an unforgettable journey through the picturesque Cape Winelands, where world-class wines and breathtaking scenery await. Our Cape Town Win...

Metal Fabrication: Choosing Metal Fabrication Melbourne Services for Custom Projects

What Modern Metal Fabrication Involves From individual components to complete structures, metal fabrication brings together processes such as desig...

Why Giant Rats Tail Grass Keeps Coming Back After Spraying

Giant Rats Tail Grass (GRT) is one of the most frustrating pasture weeds for farmers and lifestyle property owners. You spray an infested area, see th...

When Custom Cardboard Boxes Make Sense for Your Business

Custom cardboard boxes can be useful when a standard carton does not fit a product, packing method or presentation requirement particularly well. A ...

Full-Height vs. Pop-Top Caravan: Which Is Better for Family Travel across WA?

A pop-top caravan is an excellent choice for travellers who want the comfort of a caravan without committing to a larger, bulkier setup. With a lowe...

Bottle Label Printing: Key Factors for a Professional Finish

Why the Printing Method Matters When businesses need packaging or printed containers developed for a particular application, the right supplier can m...

Virtual Livestock Fencing and GPS Tracking: Improving Visibility Across Cattle Properties

What Virtual Livestock Fencing Means for Modern Cattle Management Managing cattle across extensive properties requires more than knowing where anim...

Sydney Pawnbrokers Explained: How Hocking Your Car Actually Works

Sometimes you need cash, and you need it soon. If you own a car, you may already have a way to get it. That's what people mean when they say they've...

Moving Interstate from the Gold Coast to Brisbane (or Back)? What Removalists Wish You Knew First

Have you talked to anyone who’s done the move? They say the same thing: the drive up the M1 is the easy part. It's everything around it that catches...

Why the Spring School Holidays Are a Great Time to Visit Coffs Harbour

The spring school holidays are a good time to spend a few days on the Coffs Coast. The weather is starting to warm up, there is plenty to do outdoor...

What to Do When an Older Car Is No Longer Worth Keeping in Melbourne

Ever looked at another repair quote and wondered whether your old car is still worth the trouble? It is a common turning point for Melbourne motoris...

Your Baby's First Year: A Local Guide to Feeding, Sleep, and When to Get Extra Support

Ask ten parents in a Brisbane mothers' group how their baby is feeding or sleeping, and expect ten different answers.  Someone's baby sleeps throug...