Australia Proposes Extending Leverage Caps to Crypto-Settled Derivatives

The Australian Securities and Investments Commission (ASIC) has proposed expanding its regulatory framework to include certain derivatives settled in digital assets, a move designed to extend retail investor protections into the evolving cryptocurrency market. The regulator announced on Monday, 12 October 2026, its intention to apply existing leverage limits and safeguards against negative balances to these products.

Specifically, ASIC's proposal targets contracts for difference (CFDs) that are settled by the transfer of digital assets. CFDs are financial instruments that allow traders to speculate on the price movements of an underlying asset without actually owning it. Currently, Australia's CFD rules primarily cover contracts settled in cash or through offsetting obligations between parties.

Under the new proposal, any contract settled by transferring digital assets — even those tracking non-crypto assets — would fall under the expanded CFD regulations, provided they meet other established criteria. However, certain crypto futures and options with fixed expiration dates would remain outside the scope of these specific CFD rules.

Australia's existing CFD framework, implemented in 2021, already mandates leverage caps for retail traders and requires providers to close positions automatically when account funds drop below specified levels. Furthermore, negative balance protection ensures that clients cannot lose more than the funds deposited in their CFD trading accounts. This new proposal seeks to mirror these protections for crypto-settled derivatives.

Why it matters

This initiative underscores a global trend among financial regulators to bring high-risk crypto products under the purview of traditional financial oversight. By extending leverage limits and negative balance protection, ASIC aims to shield retail investors from the significant volatility and potential for substantial losses often associated with highly leveraged trading in digital assets. The consultation period for feedback on the proposed extension and amendments will run until November 9.

The regulatory action signals ASIC's commitment to creating a more secure trading environment, aligning the risks associated with crypto derivatives with those of conventional leveraged products. It represents a significant step in integrating digital asset trading into the established financial regulatory landscape, ensuring a consistent level of consumer protection regardless of the settlement asset.

What to watch

ASIC's proposal is part of a broader, concerted effort by Australia to establish a comprehensive regulatory framework for digital assets. In April 2026, Australia passed landmark legislation to bring crypto exchanges and tokenized custody platforms under its financial services licensing regime. This new regime is set to take full effect on April 9, 2027, marking a significant overhaul of the country's approach to crypto services.

In a related move, ASIC also required crypto firms operating under temporary enforcement relief to apply for full licenses by September 30, 2026, or seek amendments to their existing licenses. As the consultation period for the derivatives proposal concludes, market participants will be closely watching for the finalisation of these rules and their integration into Australia's rapidly maturing digital asset regulatory ecosystem, alongside the upcoming implementation of the broader licensing framework.