Australia’s securities regulator has proposed expanding its rules on contracts for difference to include products settled through digital asset transfers, aiming to apply existing retail investor safeguards to a wider range of leveraged derivatives.

The Australian Securities and Investments Commission on Monday outlined plans to update the definition of CFDs so that qualifying contracts settled by transferring digital assets fall under the same framework as those settled in cash or by offsetting obligations. The changes would apply even when the underlying exposure involves assets outside the cryptocurrency market, provided the products meet other CFD criteria.

Retail Protections and Leverage Limits to Continue

CFDs allow traders to speculate on price movements of assets such as cryptocurrencies, equities or commodities without owning the underlying instrument, often using leverage. Australia’s current product intervention order, which took effect on March 29, 2021, and is due to expire on May 23, 2027, already imposes leverage caps, requires providers to close positions when account equity falls below set levels, and offers negative balance protection so clients cannot lose more than the funds in their trading accounts. Restrictions also limit promotional incentives aimed at retail clients.

ASIC proposes renewing the order for a further 10 years, subject to ministerial approval, to provide longer-term regulatory certainty. The regulator said products with similar economic characteristics and risks should receive consistent treatment regardless of settlement method. Certain cryptocurrency futures and options that have fixed expiration dates would remain outside the CFD rules.

Additional amendments would clarify that each CFD position must satisfy its own margin requirement, preventing providers from netting opposing positions to reduce the capital needed. The proposals also address margin calculations for CFDs linked to options and require firms to keep records of any permitted discount offers. References to “cryptoasset” would be replaced with “digital asset” throughout the order.

Substantial Retail Losses Prompt Renewal Push

The regulator’s assessment of trading outcomes under the existing order showed that 68 percent of retail clients trading CFDs recorded a net loss in the 2023–24 financial year. Combined net losses exceeded $458 million, including $73 million in fees. Among those trading CFDs over options, 85 percent lost money.

ASIC stated that the intervention order has reduced harm since its introduction but that losses remain substantial. The agency views the current protections as effective and necessary given the ongoing risks of leveraged trading, and it would retain the power to revoke the order earlier if circumstances warranted.

Broader Digital Asset Oversight Advances in Parallel

The CFD proposal arrives as Australia continues to tighten oversight of digital asset businesses. Temporary licensing relief for certain firms ended on September 30, requiring those entities to apply for an Australian Financial Services licence or seek variations to existing authorisations. More than 45 digital asset licensing applications had been recorded after updated regulatory guidance issued in October 2025. Operating without the required authorisation outside the relief conditions can attract civil or criminal penalties, with potential fines reaching 10 percent of annual turnover under financial services laws.

Separate legislation, the Corporations Amendment (Digital Assets Framework) Act 2026, received Royal Assent in April and is scheduled to commence on April 9, 2027. It will bring digital asset platforms and tokenised custody platforms into a dedicated licensing regime overseen by ASIC, covering custody, transactions, settlement and financial resource requirements. Some firms already authorised under existing financial services rules may need to update their permissions when the new framework begins.

Earlier enforcement activity has included a Federal Court order requiring Binance Australia Derivatives to pay a civil penalty of approximately $7 million after 524 retail clients were incorrectly classified as wholesale investors. The firm had already paid about $9.1 million in compensation.

The High Court also examined the scope of ASIC’s authority over cryptocurrency products in June, ruling that a former fixed-yield investment product offered by Block Earner constituted both a financial investment facility and a derivative, confirming the need for a financial services licence. The matter was returned to the Full Federal Court for consideration of penalties.

ASIC is now accepting feedback on the CFD proposals until November 9, after which any revised order would require ministerial approval before taking effect.