Understanding the risks and regulatory landscape is essential before investing in cryptocurrency.
What Are the Common Risks Involved in Cryptocurrency?
Market Risks
Cryptocurrency markets are highly volatile. Prices can fluctuate significantly within short periods, sometimes even within hours. As a result, there is no guarantee that you will be able to buy or sell a cryptocurrency at your preferred price or time.
Liquidity risk may also arise, particularly with smaller or less-traded cryptocurrencies, which can be more susceptible to sharp price movements and market manipulation.
Operational Risks
Cryptocurrencies operate on digital and internet-based systems, making them vulnerable to cybersecurity threats, hacking, and technical failures. Blockchain networks may experience outages, software bugs, or protocol changes such as forks, which can affect the functionality or value of a digital asset.
In addition, the regulatory environment for cryptocurrency is still developing. Laws, regulations, and tax treatment may change over time, potentially impacting how cryptocurrencies can be used, traded, or held.
No Safety Net
Unlike traditional bank accounts, cryptocurrencies are not protected by government-backed guarantees or compensation schemes. If a loss occurs due to fraud, system failure, or user error, recovery may not be possible.
Cryptocurrency transactions are generally irreversible, meaning once a transaction is confirmed on the blockchain, it cannot be cancelled or undone.
Is Cryptocurrency Regulated in Australia?
Cryptocurrency is not currently regulated by ASIC (the Australian Securities and Investments Commission). This means consumers do not receive the same protections as they would for other financial products that are regulated by ASIC.
AUSTRAC’s Role
AUSTRAC regulates cryptocurrency exchanges in Australia under anti-money laundering and counter-terrorism financing (AML/CTF) legislation.
From 31 March 2026, AUSTRAC will expand its regulatory coverage to include all digital asset service providers. This change is expected to introduce increased compliance and reporting requirements, reflecting the continued growth and maturation of the digital asset industry.
AFCA Protection
The AFCA manages financial complaints and dispute resolution in Australia. However, most cryptocurrency providers are not AFCA members.
As a result, AFCA is generally unable to assist with complaints related to investment losses or market performance involving cryptocurrencies. Its role is typically limited to resolving issues related to processes or service standards, where the provider is a participating member.
Scam Prevention and Awareness
Cryptocurrency-related scams remain widespread. Investors should be cautious of:
Schemes promising guaranteed or low-risk returns
Fake or unregulated platforms requesting upfront deposits
Unsolicited investment offers via social media or messaging apps
Phishing attempts designed to obtain login credentials or personal information
As a general rule, offers that appear too good to be true should be treated with caution.
For the latest guidance and scam alerts, visit ASIC MoneySmart and Scamwatch.