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ASIC Consultation on New Digital Asset Rules
Regulation | Dec 12, 2024
Image: Freepik/WangXiNa
The Australian Securities and Investments Commission Seeks Input on New Digital Assets Rules
The Australian Securities and Investments Commission (ASIC) is working to clarify rules for businesses and individuals working with digital assets. They've published Consultation Paper 381 (CP 381) outlining updates to Information Sheet 225 (INFO 225), which provides more specific guidance on how existing financial laws apply to assets like stablecoins, staking services, and tokenized products. Australia's securities regulator is now seeking feedback on these updates.
What Updates Are in Scope?
ASIC’s proposed updates focus on ensuring digital asset businesses understand their obligations under current financial laws. The updates include
See: Canada Pauses CBDC Plans, Australia Advances Wholesale Focus
- ASIC offers 13 practical examples (see below) to show how different digital asset types and services might be classified as financial products.
- Businesses dealing with digital assets classified as financial products must follow the same rules as traditional financial services including obtaining an Australian Financial Services (AFS) Licence.
- ASIC proposes a grace period for businesses actively working towards compliance to protect them from enforcement actions during the licensing process.
- These updates aim to protect customers while supporting market integrity and innovation.
13 Practical Examples
In the consultation document, ASIC provides 13 practical examples to help businesses understand their legal registration and compliance obligations:
1. Stablecoins as Financial Products - Stablecoins tied to an asset (i.e., fiat currency or government bonds) could be seen as financial products depending on their purpose and how they are promoted. For example, if a stablecoin is backed by government bonds and offers financial benefits, it may need licensing as a managed investment scheme.
2. Staking Services - Businesses that let customers stake tokens to earn rewards may fall under financial product rules (esp if they add features like pooling tokens). For example, a staking service combining tokens from multiple users to meet blockchain requirements could require an Australian Financial Services (AFS) licence.
See: Vancouver’s Bitcoin Vision: A New Era for City Finances
3. Tokenized Assets - Tokens representing physical or financial items (i.e., gold or real estate) could be classified as securities if they involve shared profits or pooled funds. For example, a gold-backed token sold on an exchange may need to comply with securities or investment regulations.
4. Wrapped Tokens - Tokens that represent other assets might be financial products if they suggest investment or profit potential. For example, a token offering a stake in a project or company may require registration licensing as a security.
5. Token Sales and Fundraising - Raising funds through token sales, such as Initial Coin Offerings (ICOs), could be regulated as securities if linked to the issuer’s success. For example, selling tokens to finance a blockchain venture may require a prospectus to comply with securities laws.
6. NFTs and Collectibles - Non-fungible tokens (NFTs) are generally not financial products unless marketed with potential financial returns. For example, an NFT that promises a share in future profits from sales may fall under investment rules.
7. DeFi Platforms and Services - Decentralized Finance (DeFi) platforms could require licences if they manage pooled funds or offer lending and borrowing services. For example, a DeFi protocol pooling user funds to generate returns might be classified as a managed investment scheme.
See: Two Artists Sue SEC for NFT legal Showdown
8. Digital Asset Wallet Providers - Wallets offering extra services like earning interest or staking options may need to comply with financial product laws. For example, a wallet letting users pool assets to earn interest would likely require a licence.
9. Payment Services Using Digital Assets - Platforms facilitating payments with digital assets may need licensing as non-cash payment facilities. For example, a business allowing customers to use tokens for everyday purchases might need authorization to operate.
10. Buy-Back Arrangements - When businesses promise to buy back tokens based on value or performance, they may be treated as financial investments. For example, a token issuer guaranteeing buy-backs at a higher price could need an AFS licence.
11. Rewards and Loyalty Programs - Rewards programs using digital tokens may be financial products if the tokens are tradeable and linked to business success. For example, a loyalty token offering value tied to a company’s performance might require regulation.
12. Bundled Services and Products - Digital assets combined with other services may be regulated as a single financial product. For example, a package including tokens with staking and governance features may require licensing for the entire service.
13. Secondary Market Trades - Tokens traded on secondary markets could be regulated if their value depends on the issuer’s performance. For example, a token that increases in value as the issuing company succeeds might fall under securities laws.
See: WonderFi Announces Australian Market Entry
The thirteen scenarios above help businesses assess whether their digital asset offerings comply with existing financial regulations, and clarifies when licensing, disclosure, and compliance obligations apply. Companies are encouraged to assess their service offerings using the practical examples and seek feedback from the ASIC if unsure.
What Does ASIC Want Feedback On?
ASIC is seeking input from digital asset businesses, financial service providers, and other stakeholders on the following:
- Are the examples and explanations in the updated guidelines clear and easy to understand? Do they help businesses navigate the rules for digital assets?
- Is the current process for obtaining licences practical for digital asset businesses? Are there specific issues for products like stablecoins or wrapped tokens?
- ASIC is considering a "no-action" policy that would let businesses applying for licences operate without penalties during the review period. What are your thoughts on this 'temporary relief' idea?
See: PayPal’s Legal Win Helps Shape Future of Digital Wallets
- How can ASIC’s guidelines help businesses transition smoothly to the Government’s proposed regulations for digital asset platforms and payment stablecoins?
- What challenges do businesses face when trying to meet these regulations? Are there practical problems ASIC should address in its guidance?
Your Input Matters
If you’re in the digital asset space or have a stake in how these regulations evolve, now’s the time to speak up. By sharing your feedback, you can help ASIC create rules that support innovation while protecting consumers and keeping markets fair.
The deadline to send your comments to ASICs Digital Asset Team on the proposed updates is February 28, 2025. ASIC plans to release the final guidelines in mid-2025. Email: digital.assets@asic.gov.au
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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