Australia proposes leverage caps for crypto-settled derivatives

Abstract:Australias ASIC proposes extending retail CFD protections to crypto-settled derivatives, aiming to close regulatory gaps in leveraged trading.

Australias securities regulator wants to extend leverage limits and other retail investor safeguards to certain trading contracts settled in crypto.

On Monday, the Australian Securities and Investments Commission (ASIC) proposed expanding the rules for contracts for difference (CFDs), which let traders bet on price movements without owning the underlying asset.

The rules generally cover contracts settled in cash or by offsetting obligations between the parties. ASIC wants to add contracts settled by transferring digital assets, including those tracking non-crypto assets, provided they meet the other criteria for a CFD.

ASIC said that certain crypto futures and options with fixed expiration dates would remain outside the CFD rules.

Australia‘s existing framework, introduced in 2021, caps leverage and requires providers to close positions when account funds fall below specified levels. Negative balance protection also limits losses to the funds in a client’s CFD trading account.

The regulator is seeking feedback on the proposed extension and amendments until Nov. 9.

Separately, Australia passed legislation in April to bring crypto exchanges and tokenized custody platforms under its financial services licensing framework, with the new regime taking effect on April 9, 2027.

ASIC also required crypto firms relying on temporary enforcement relief under existing financial services law to apply for licenses by Sept. 30 or seek changes to their existing licenses.

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