Are the new ASIC reporting laws going to damage the crypto industry?

How will the ASIC’s new reporting law affect crypto trading?
Australian Securities and Investments Commission (JIM RICE)

The Australian Securities and Investments Commission announced last Friday that it will be implementing a new set of laws for financial companies in the country, which will drastically change the way entities report their daily traded volumes.

Before now, all entities were required to report using the snapshot method which meant that all opened and closed positions were to be accounted for at the end of the day, but the ASIC is looking to determine the culture and business models of these companies.

Therefore, according to the new law, companies will be expected to make reports according to how many positions will stay open at the end of the business day.

This amendment to the law was made due to ESMA pressure, or if we give it more credit, ESMA inspiration.

The European Securities Market Authority has been governing the EU market with an iron fist due to bad industry practices and shady corporate laws.

In order to determine the companies’ business models in terms of overnight positions, an amendment was made to track open positions at the end of the day.

Why is this necessary?

Prior to this law going into effect, the financial companies could simply report the open positions as closed ones and add them to their daily traded volume, which would increase their overall daily turnover.

It is not clear whether or not this was the case with Australian companies, but multiple EU companies were caught conducting such business operations.

The implementation of such a law is to determine corporate culture in the country and how honest the companies go about their reporting duties.

How can this affect crypto trading?

The ASIC has the authority to determine which derivative should report through which method.

The companies still have the option to choose between a snapshot and life-cycle reports, but should ASIC tell them otherwise, they will have to comply.

This was first seen when the regulator forced a local broker to refund an overseas customer, due to misunderstandings in the OTC report, and a requirement to send the snapshot one.

This led the regulator to focus more on overseas operations of its brokerages, which were heavily dependant on European customers due to their leverage offerings.

More importantly, the snapshot report system could be implemented with cryptocurrencies, which will reduce the daily traded volume drastically.

There have already been reports about several companies that were accused of Wash trading in order to increase their daily turnover.

Wash trading is when a market maker buys and sells its assets repetitively in order to increase their volume and turnover and make more through commissions and spread.

It is actually one of the ways some crypto exchanges liquidate their assets.

With the implementation of the snapshot report on cryptocurrencies, the market is bound to become much more stable and manageable.

Having to report open trades at the end of the day will prevent companies from marking up their daily traded volumes and justify more revenue at the end of the month.

Overall, it’s bound to hit the local exchanges quite hard, but make the market much fairer.

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