ASIC consultation paper clarifies crypto asset classification and licensing requirements, aiming to enhance compliance and protect consumers in Australia.
The Australian Securities and Investment Commission (ASIC) has released a consultation paper aimed at clarifying how crypto assets are classified under existing financial regulations. This step places many crypto businesses in a position where licensing is necessary, aligning digital assets with traditional financial products. The aim is to provide more guidance to those working within the Australian crypto market.
ASIC has suggested changes to INFO 225 where it provides 13 illustrative examples to explain how the definitions of financial products pertain to digital assets. The objective is to remove confusion and enhance clarity in regard to regulatory compliance. Commissioner Alan Kirkland emphasized the importance of the concept of regulating the innovative system and protecting consumers, as the system itself contributes to the market’s competitiveness and integrity.
Kirkland pointed out that Australia has a very general and versatile method. He noted that the problem of categorizing digital assets is not very acute because a significant number of them are currently classified as financial products. This decision to release this draft came about after the industry demanded more definite principles. The consultation period is up to 28 February 2025, which allows firms to consider them before reacting.
The consultation paper, CP 381, contains requests for comments on the following issues. These include the latest rules outlined in INFO 225, the application of the AFS licensing to digital assets, issues with wrapped tokens and stablecoins. It also looks at exemptions and transition measures for firms seeking an AFS license or varying an AFS license.
ASIC Continues Compliance Efforts While Reviewing Crypto Rules
ASIC has intended to complete INFO 225 by mid of 2025 with consideration of the stakeholder feedback. For now, however, it will persist in utilizing legal instruments, including compliance and enforcement, to safeguard customers and preserve the sanctity of the market.
However, critics have raised concerns. Crypto lawyer Joni Pirovich posted on LinkedIn that the changes could lead to increased compliance expenses. This may force Australian innovators seek projects in areas with fewer regulations on innovation. Pirovich added that if the launch is done in Australia, “It can be as expensive or even more than if done in other areas.”
On one hand, the updates are intended to enhance the degree of clarity and on the other hand, they come with issues for local startups. Businesses will have to determine whether they will be in a position to bear the cost of compliance or whether it is easier to shift to countries with lax laws.
Overall, ASIC’s updates show the regulator’s commitment to aligning crypto regulations with traditional financial standards, promoting both growth and innovation.
