Australia needs to tread carefully should it eventually launch a crypto exchange-traded product (ETP), the country's financial regulator said Wednesday.

In a consultation paper from the Australian Securities and Investment Commission (ASIC), the regulator is reaching out to market participants for feedback on whether crypto underlying products can meet existing ETP expectations.

ASIC said it is attempting to evaluate whether cryptos are appropriate underlying assets, whether they could be reliably priced, and how they should be classified with respect to underlying asset rules, according to the paper.

The paper seeks feedback in two main areas on how an ETP may affect the market including compliance costs and effects on competition. ASIC's request for feedback comes as the Australian Securities Exchange, one of the country's major bourses, is considering applications for the launch of a domestic ETP by year's end.

"At this point in time, in our view, the only crypto-assets that are likely to satisfy these factors are bitcoin and ether," the regulator said.

How product issuers can ensure these products are compliant with the existing regulatory framework, including with respect to custody, risk management and disclosure were also mentioned for consideration.

In Australia, there are three types of categories that fall under an ETP including exchange-traded funds, managed funds and structured products – a security or derivative which gives financial exposure to the performance of underlying instruments.

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"We are aware of interest in, and demand for, domestic crypto-asset ETPs," said the regulator. "However, we are also aware of the real risk of harm to consumers and markets if these products are not developed and operated properly."

Comments need to be submitted to the regulator by July 27 with those wishing to provide feedback having the option to remain anonymous or use an alias.