Australia's chief financial watchdog may soon follow the suit and crack down on the cryptocurrency exchanges after the UK's Financial Conduct Authority (FCA) announced a ban on crypto exchange Binance from offering financial services in the country.
Looking back, effective from 29 March 2021 the Australian Securities and Investments Commission (ASIC) limited maximum leverage and imposed restrictions on the margin trading in fiat currencies, indices and stocks via contracts for difference (CFD)/spread betting after the FCA did the same in the UK earlier.
ASIC said in its announcement the maximum penalty for a contravention of a product intervention order is five years’ imprisonment for individuals and substantial pecuniary penalties of up to $555 million for corporations.
On June 25, the FCA informed Binance that by June 30 it must display a notice stating "Binance Markets Limited is not permitted to undertake any regulated activity in the UK" on its website and social media channels.
It must also secure and preserve all records relating to UK consumers and inform the FCA this has been done by July 2.
Trading cryptocurrencies is not directly regulated in the UK or Australia, but other related activities — such as selling derivatives, spread-betting, margin/leveraged trading and short-selling offered by many crypto exchanges — fall under the regulated financial services and require a financial licence.
Leveraged trading entails using a relatively small amount of capital to buy currency worth many times the value of that capital. Leverage magnifies minor fluctuations in currency markets in order to increase potential gains and losses.
This essentially means the leverage magnifies profits if the price goes in the favorable direction (depending on short or long orders), but it leaves traders in a much more vulnerable position if price goes in the wrong direction.
A CFD is a leveraged derivative contract that allows a client to speculate in the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or cyrptoassets.
The world's largest cryptocurrency bitcoin has roughly halved from a peak near US $65,000 in April, hurt by a cryptocurrency crackdown in China, looming regulatory scrutiny around the world and environmental concerns and whether any of the cryptocurrencies can actually become a currency to stay.
The total market value of cryptocurrencies has dwindled to less than half of what it was near $2.5 trillion mark in April.
The total market cap of Bitcoin plunged below US $600 billion on Monday, just half of its once whopping US $1.2 trillion value.
Risk Warning: Cryptocurrency is a unregulated virtual notoriously volatile instrument with a high level of risk. Any news, opinions, research, data, or other information contained within this website is provided for news reporting purposes as general market commentary and does not constitute investment or trading advice.
