Australia to Set Leverage Limits for Crypto Derivatives

The Australian Securities and Investments Commission (ASIC) has proposed expanding the rules regarding contracts for difference (CFDs) to include certain trading contracts based on cryptocurrencies. This will allow for the establishment of leverage limits and provide negative balance protection for some derivatives calculated based on digital assets.

At a meeting on Monday, ASIC presented a proposal indicating that the existing rules for CFDs, which allow traders to bet on price fluctuations without the need to own the underlying asset, will be expanded. Currently, the rules cover contracts settled in cash or by offsetting obligations between parties. ASIC proposes adding contracts that will be settled by the transfer of digital assets, including assets related to non-cryptographic assets, provided other criteria for CFDs are met.

Some crypto futures and options with fixed expiration dates will remain outside the scope of CFD rules. The existing system, introduced in 2021, limits leverage and requires providers to close positions when account funds fall below a set level. Negative balance protection also limits losses to the funds in the client's CFD trading account. ASIC is seeking feedback on the proposed expansion and amendments until November 9. Separately, Australia passed a bill in April that includes crypto exchanges and tokenized storage platforms in its financial services licensing system, with the new regime coming into effect on April 9, 2027. ASIC has also required crypto companies relying on temporary exemptions from current financial services legislation to apply for licenses by September 30 or amend their existing licenses.