Australia Proposes Leverage Cap for Digital Asset Derivatives

ASIC's proposal extends leverage limits and protection against negative balances to some cash-settled derivatives on digital assets.

ASIC's proposal extends leverage limits and negative balance protection to certain settled derivatives on digital assets.

Australia's securities regulator wants to extend leverage limits and other protections for retail investors to some cryptocurrency-settled trading contracts.

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

These rules generally cover contracts that are settled in cash or by offsetting obligations between the parties. ASIC wants to add contracts that are settled by the transfer of digital assets, including those that track non-crypto assets, provided they meet the other criteria of a CFD.

ASIC said certain digital currency futures and options with fixed expiry dates would remain outside the CFD rules.

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

The regulator is seeking feedback on the proposed extension and amendments by November 9.

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

ASIC is also requiring crypto companies that rely on temporary, enforcement exemptions under the existing Financial Services Act to apply for a license by September 30 or seek a change to their existing licences.