Warning Signs – Why the Collapse of Cryptocurrency Exchanges Should Spark Discussion For Self-Managed Superannuation Funds

crypto currency exchange collapse

Recent news that Australian cryptocurrency exchange Digital Surge has gone into administration, combined with last month’s collapse of the FTX exchange has left many wondering what is happening in the crypto world, and why, and given how little most people know about cryptocurrency, I am not surprised.

While details around the future of Digital Surge are still unfolding, it is a trading platform in the same way that the FTX exchange was – allowing people to buy and sell cryptocurrency.
The demise of the FTX exchange was the result of a number of issues, including admissions from founder Sam Bankman-Fried that he ‘misaccounted’ US$8b, with reports of more than US$3b being owed to FTX’s 50 biggest creditors alone.

While the downfall of both exchanges raises a myriad of questions – perhaps one of the most urgent that needs to be asked right now is how can cryptocurrency, an asset within a famously unregulated and volatile market, be a permissible investment for retirement saving within a self-managed superannuation fund?

While the first, and arguably most well-known, cryptocurrency Bitcoin was launched in 2009, crypto has really only exploded in popularity in recent years.

What people may not realise – or maybe they do, and they don’t care – is that cryptocurrency operates in a highly volatile and completely unregulated market, lacking clear guidelines for traders.
It is with this background that I ask again – how and why should an unregulated asset be allowed within the confines of an SMSF, which themselves are bound by tight rules and regulations, and subject to regular audits and compliance checks?

Regulation is vital to protect consumers and assist in preventing fraud, scams and other forms of financial crime. As an example, SMSFs are not allowed to rent residential investment property to related parties, even at arm’s length. And yet as it currently stands, unregulated cryptocurrency is considered an acceptable investment to enable retirement savings.
There is a stark disparity here that doesn’t make sense.

While we cannot blame regulators for every failure, how many financial disasters will it take to regulate the crypto market? Surely it’s time for our questions to start being asked and answered?
When auditing SMSFs, it is my experience that some Trustees can be hesitant when they are asked for information on any crypto assets held in the Fund, a reticence that perhaps says something about the nature of crypto itself.

It’s not for me to say whether cryptocurrency is a good or bad asset – however I do say that those looking to trade in crypto need to ensure they’re carrying out proper research and due diligence before handing over their money, and I believe greater regulation will go some way to assisting in that process.

It will require a joint effort from global Governments, and it’s possible that we might start seeing action following any FTX-related investigations, which would be a positive start.

Until we see crypto markets take steps toward regulation and maturation, I would suggest we are going to continue to see other crypto-related collapses, and unfortunately, more people watch their retirement nest eggs evaporate before their very eyes.

Naz Randeria is the Managing Director of Reliance Auditing Services.

About Reliance Auditing Services

Founded by Managing Director Naz Randeria over a decade ago, Reliance Auditing Services is a specialist independent auditing services firm, specialising in audit of self-managed superannuation funds and also providing external audit and assurance services to clients across Australia. The team offers more than 25 years’ experience across a very diverse range of businesses and organisations.


Reliance Auditing Services is a specialist independent auditing services firm providing quality audits to SMSFs, companies, not-for-profits and AFS licensees all over Australia. Reliance Auditing places a huge emphasis on educating our clients to ensure they fulfil their reporting obligations.

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