A Parliamentary Committee has urged increased scrutiny of financial services licences following the collapse of a major crypto market. 

In the wake of the collapse of cryptocurrency trading company FTX, which held an Australian financial services licence (ASFL), a parliamentary committee has called for greater scrutiny of licence transfers and an audit of current licence holders. 

The committee's report expresses concerns about the ease with which FTX obtained the “difficult and highly prized” licence, raising questions about the regulation of such licences.

FTX had bypassed the standard process for obtaining a financial services licence in Australia by acquiring a company that already held one. 

The Australian Securities and Investments Commission (ASIC) had not assessed FTX's suitability to hold a licence prior to its collapse.

ASIC informed the parliamentary committee that approximately 200 licence transfers occur each year through the same method used by FTX. However, current legislation does not allow for a comprehensive assessment of new licence holders. 

Warren Day, ASIC's chief operating officer, acknowledged the issue, stating that certain licensee types, such as derivatives from foreign exchange contracts, posed significant challenges.

The committee has recommended that ASIC include information on licence transfers in its annual report and conduct an audit of instances where an entity acquired a licence through transfer or a change in control after previously being denied the same licence type. 

It also called for an examination of high-risk licence transfers, along with a review of the incentives for companies to acquire licences through transfer or change in control rather than the standard application process.

The parliamentary committee also expressed concern over the “minimal oversight” in the transfer of ASIC licences. 

To address these concerns, the committee recommended that ASIC assess all high-risk licence transfers, including market licences and benchmark operator licences. It also urged ASIC to review the economic incentives for companies to acquire licences through transfer rather than applying for them.