As crypto adoption continues to rise, the number of investors also follows suit. This would have had a positive impact except for the alarming rate at which unregulated assets are traded.
According to the Australian financial regulatory agency, the surge in unregulated crypto trading became widespread amid the COVID-19 pandemic.
ASIC Revealed the Rise of Unregulated Crypto Investment
According to reports, the Australian Securities and Investment Commission (ASIC) conducted research last November. The study is to ascertain the rate of crypto investment as the world grapples with the impact of the pandemic.
Joe Longo, the ASIC’s chairman, noted that the commission is greatly concerned with the increase in virtual asset investment products. However, Longo added that digital assets are unregulated and volatile enough to be left alone.
Furthermore, the survey shows that digital assets are the second-most traded products in Australia. According to the research data, the crypto industry contributes 44% to the total number of investors in the survey.
Moreover, 25% of the investors revealed that digital currency was the only investment category they engaged in during the period.
Of the 44% that traded in digital assets, only 20% affirmed that they knew the risks involved.
Meanwhile, this has reached an alarming rate given the percentage of those unaware of the attendant risks.
The Need for Greater Regulation
The chair of ASIC noted that investors have little to no protection while holding such assets. Due to this, the agency has resolved to put together comprehensive regulations for the crypto industry. The regulations aim to protect investors as they navigate the volatile investment terrain.
In another development, Australian Senator Andrew Bragg also called for protecting investors in the digital asset space. He agrees with Longo’s view of using legislation to shield investors from the market’s instability.
However, an Australian-based digital asset lawyer, Joni Pirovich, expressed doubts over ASIC’s jurisdiction. She revealed that ASIC is not empowered to manage the interaction between issuers of tokens and consumers. According to her, the relationship is complex, and policymakers have yet to find a solution. As a result, crypto exchanges in Australia face hitches in dealing with traders who buy and issue tokens.
Why are Crypto Assets Volatile?
Despite the widespread frenzy about digital assets, cryptocurrency is a relatively new concept. Digital currencies are attracting investors and, at the same time, pushing others away.
The crypto market is volatile and vulnerable because it is controlled by a few individuals known as “whales.” This group of people owns large stashes of digital assets, and their decisions expose the industry’s vulnerability.
However, as the volatility is high, it then means that the rewards will also be high. The general rule in the crypto ecosystem is to buy the dip to make more gains when the market recovers.
Many believe it is hard to quantify the value derived from crypto trading compared to other commodities.
But time will show how valuable the industry is as others try to buy into the frenzy.