Curiosity, ingenuity, and innovation has transformed humans over millennia. Technologies like making fire, the printing press, flight, or the internet have changed our lives and revolutionized every industry on the planet. While we don’t yet know if cryptocurrencies will usher in a financial revolution, we do know one thing, it is a conversation that more and more of our clients are wanting to have with advisors at Viridian.
At Viridian an advisor will help you look at any asset, whether it be shares, property or cryptocurrency in context rather than isolation.
One thing that currently stands out compared to asset classes such as publicly listed shares or property is regulation, or rather a lack thereof. This is an area that ASIC has been quick to highlight.
Below is a transcript of an ASIC podcast between ASIC Communications adviser Louise Tapsell and Hema Raman, Crypto-Asset Coordinator in June 2021:
Louise: So, as a first-time investor, let’s say I decide to invest in a crypto asset. Would I be protected?
Hema: The platforms where you buy and sell crypto-assets are likely not regulated by ASIC. So, you could be buying off a platform without necessarily having any recourse if things fail.
Louise: Unlike say, the ASX, where you may buy shares of a listed company. The ASX has a licence responsibility to ensure a fair orderly and transparent market and other responsibilities under the Corporations Act.
Hema: Yes, and not all crypto-asset platforms are registered in Australia, even though some are registered through AUSTRAC for anti-money laundering purposes, but this does not offer you protections as an investor.
If something were to go wrong, you won’t be able to take your complaint to the Australian Financial Complaints Authority (AFCA).
This year the conversation on cryptocurrency and regulation could grow even louder, especially with Bitcoin falling more than 50% from its record highs at the date of writing. As with any product or service, without regulation, there are few consumer protections. For Australian investors, a lack of regulation may mean there is an inability to take a complaint to AFCA if something was to go wrong, increasing the risk of an already volatile asset class.
Viridian and future facing advisors will understand how digital assets may form part of a diversified portfolio into the future. But first there needs to be greater clarity on regulation to effectively consider implications on how to secure, store, insure and include these digital assets in advice areas such as estate planning. Investors should always be wary and we recommend speaking to an advisor to make sure any investment decision fits within the context of your goals and objectives.
One Step Further – What is an NFT?
A non-fungible token (NFT) is a unit of data stored on a digital ledger. NFTs are unique and therefore are not interchangeable. You can use an NFT to represent an ownership interest in any tangible or intangible asset, even where you store the asset outside the digital ledger.
John Tsiokaras is an Executive Advisor/Digital Evolution Manager at Viridian Advisory.
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