ASX Calls for Regulations of Crypto Custodians

The Australian Securities Exchange (ASX) wrote a letter to the country’s Senate last week pointing out several risks in holding digital assets and calls for better regulations around the industry.

“On major Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term platforms such as Bitcoin and Ethereum, digital assets are associated with a user through an address. Whoever can access the address is effectively the custodian of the digital assets in that address,” the stock exchange explained.

Proof-of-Keys

The letter was particular with the storage of the digital assets on the crypto exchange and said that the private keys held by the exchanges of their customer crypto wallets leave the assets vulnerable to security breaches.

Additionally, it pointed out that cryptos stored on exchanges possess the risks of dealing in an undisclosed or unauthorized manner.

Indeed, we have seen several high-profile crypto heists in the past that siphoned billions of dollars worth of Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term together. Even big and reputed crypto exchanges are not secure from breaches. On the other hand, many crypto exchanges pulled exit scams to run away with customer deposits.

“Crypto exchanges can provide a user experience which is attractive to many Australians who wish to invest in crypto assets, including the experience of a password-based login. However, as others have noted, there are risks in these custodial arrangements for digital assets,” the ASX noted. “Many of these risks are associated with the management of private keys.”

The exchange is now proposing the Senate committee come up with laws that will require disclosure of the terms of custodial arrangements and risks to the users. Additionally, core standards need to be set relating to capital, technological, operational and governance matters of crypto custodians.

“It is worth considering whether investors understand the risks and benefits of owning digital assets through a custodian or an exchange operating as a custodian,” the letter added.