The Australian Securities and Investments Commission (ASIC) has released a consultation paper aimed at providing greater clarity on how the current financial product definitions apply to digital assets and related products.
Namely, Information Sheet 225 Crypto Assets (INFO 225) outlines ASIC’s views on when a cryptocurrency or digital asset, or related product, may qualify as a financial product.
Moreover, the document also discusses the scenarios under which a person may be providing a financial service that requires a licence from ASIC.
“In line with the continued expansion and emerging offerings in digital asset markets, our regulatory approach also continues to evolve,” ASIC said in the document, which includes 13 “practical examples” demonstrating how the current financial product definitions apply to digital assets and related products.
“We consider that now is an appropriate time to update INFO 225. This is facilitated by the existing regulatory regime being principles-based and providing sufficient flexibility to regulate digital assets that are financial products.”
ASIC’s examples range from exchange tokens to digital asset wallets, further demonstrating how the current definitions and concepts apply to hypothetical digital asset scenarios under the existing regulatory regime.
The consultation paper specifically seeks feedback on the application of the existing Australian Financial Services Licence (AFSL) processes, ASIC guidance and standard conditions to digital asset businesses.
The corporate regulator is also pursuing feedback on practical licensing issues for wrapped token and “stablecoins”, and in particular on issues arising from the potential transition to the government’s proposed digital asset platform and payment stablecoins regimes, and on consideration of potential regulatory relief.
Moreover, it is seeking stakeholder feedback on a potential class “no action” position for digital asset businesses that are in the process of applying for different licences.
ASIC commissioner Alan Kirkland highlighted the importance of regulatory clarity, noting that a well-regulated financial system benefits everyone in the community, and supports “consumer confidence, market integrity and facilitates competition and innovation”.
“Australia’s financial services regulatory regime is broad and technology neutral. Many digital assets and related products are financial products under the current law,” he said in the announcement.
“Stakeholders have been calling for greater clarity and in response, we are releasing our draft updated guidance.”
ASIC first published guidance on crypto assets in 2017, addressing how the Corporations Act definitions of financial products may apply to crypto assets and related products and services.
INFO 225 was subsequently updated in 2018, 2019 and 2021.
In 2018, the term “crypto asset” was introduced and in the 2019 update, further information and broader consideration of when crypto assets and related products may be financial products was added.
It was further updated in 2021 to add good practice guidance for investment products providing exposure to crypto assets.
ASIC noted that digital asset markets have evolved significantly over the last 10 to 15 years, growing from a few hundred digital asset tokens to tens of thousands today.
According to data, over 360 digital currency exchanges are currently registered with the Australian Transaction Reports and Analysis Centre.
