Australia's securities regulator is pushing to apply leverage limits and loss caps to some derivatives settled in cryptocurrency.

Cointelegraph reported on Oct. 12 that the Australian Securities and Investments Commission (ASIC) proposed amendments to extend retail investor protections to certain digital asset settlement contracts.

The key is expanding the scope of regulation for contracts for difference (CFDs). CFDs are contracts that bet on price movements without directly holding the underlying asset. The current regime typically covers contracts settled in cash or through bilateral netting.

ASIC said it will also include contracts settled through the transfer of digital assets. Even contracts that track the price of non-crypto assets could be subject to regulation if they meet other CFD requirements. ASIC presented the proposal as an expansion of existing CFD rules to "contracts settled through the transfer of digital assets."

Not all crypto derivatives are covered. ASIC drew a line, saying some crypto futures and options with fixed maturity dates remain outside CFD rules. Because applicability depends on product structure, exchanges and derivatives providers are in a position to recheck the legal nature of their products.

Australia has operated CFD-related rules since 2021. The current regime sets leverage caps and requires providers to close out positions when account funds fall below a certain level. It also includes negative balance protection, limiting customer losses to funds in the CFD trading account. ASIC is seeking, through the amendment, to apply those protections to some contracts with a crypto-settlement structure.

ASIC will accept feedback on the proposed expanded application and detailed amendments until Nov. 9. It also left open the possibility that the final regulatory text could be adjusted after collecting industry views.

The move coincides with Australia’s push to overhaul digital asset regulation. Australia passed a bill in April to bring crypto exchanges and tokenised custody platforms into a financial services licensing framework. The new system is scheduled to take effect on April 9, 2027.

Along with that, ASIC required crypto firms that have operated by relying on temporary enforcement forbearance under existing financial services laws to apply for formal licences by Sept. 30 or seek changes to existing licences. In the local market, this is likely to be seen as a trend toward tighter regulatory criteria across trading platforms and derivatives businesses.

The proposal is drawing attention because it does not stop at directly regulating cryptocurrencies, but seeks to expand oversight to derivative contracts that use digital assets as a means of settlement. Future points of contention include which products meet the requirements for CFDs and how clearly the boundary will be defined for products that remain exceptions, such as fixed-maturity futures and options.