The Australian financial services landscape witnessed a significant development as the Australian Securities and Investments Commission (ASIC) announced the cancellation of FTX Australia’s license.
As the local unit of the bankrupt cryptocurrency exchange, FTX, the entity faced regulatory action that could have far-reaching implications.
On 19th July, ASIC released a press statement notifying the public of the cancellation of FTX Australia’s Australian Financial Services (AFS) license.
Despite the license cancellation, ASIC granted FTX Australia a limited window until 12th July 2024 to conduct certain financial services while concluding its client interactions. During this period, the regulator urged the entity to focus on compensating its clients.
FTX Australia catered to around 30,000 retail customers and provided services to 132 local companies. With such a substantial client base, the regulatory action drew attention from the broader cryptocurrency community and investors.
In the midst of license cancellation, ASIC clarified that FTX Australia’s obligations to continue as a member of the Australian Financial Complaints Authority (AFCA) and arrangements for compensating retail clients remain unchanged.
This statement aimed to provide clarity on the ongoing obligations of the entity despite the license revocation.
The regulatory saga surrounding FTX Australia began in November 2022 when ASIC initially suspended its license. The suspension prevented the entity from engaging in derivative and foreign exchange contract trading for both retail and wholesale customers. The suspension followed FTX’s parent company’s bankruptcy filing in the U.S.
In a noteworthy turn of events, ASIC reinstated FTX Australia’s license to facilitate the unwinding of trading positions and determining fund ownership. The move aimed to assist in resolving the complexities arising from the bankruptcy filing.
FTX had two distinct entities operating in Australia – FTX Australia and FTX Express. While the former possessed the AFS license, enabling the offer of derivative products to local customers, the latter facilitated the purchase of crypto assets using Australian currency.
Australian customers who had linked personal wallets or transferred crypto assets from other exchanges to FTX might be identified as creditors in the global claims against FTX Trading.
FTX’s Potential Re-launch and Restructuring:
According to a Wall Street Journal report from June, FTX is exploring the possibility of re-launching as an entirely new exchange.
The restructuring team is in talks with potential financial backers to support such a reboot. Current FTX creditors could be offered a stake in the reorganized crypto exchange as part of compensation measures.