Australia Crypto Industry Slams ASIC Digital Asset Regulation Draft Changes

The Australian Securities and Investments Commission (ASIC) released a new consultation paper while providing key updates to the digital assets guidance and related financial products. With this update, the regulator seeks to provide greater clarity on how the existing financial product definition applies to crypto, and can be part of the digital asset regulation. However, some crypto industry experts slammed the move saying that it will benefit only big businesses and push small players out of the market.

Australia’s ASIC Seeks Feedback on Crypto Guidance

Australia’s top financial regulator ASIC released Consultation Paper 381 (CP 381) earlier today outlining the updates to Information Sheet 225 (INFO 225) regarding (IETH) and related financial products. These products will provide clarity on how some of the traditional market rules are also applicable to digital assets.

ASIC Commissioner Alan Kirkland emphasized the importance of balancing responsible financial innovation with consumer protection. He said:

“We want to promote the growth of responsible financial innovation while ensuring consumer protection. A well-regulated financial system benefits everyone in the community as it supports consumer confidence, market integrity and facilitates competition and innovation”.

Kirkland also noted that Australia’s regulatory regime is broad as well as technology-neutral allowing digital assets to accommodate within the existing framework for financial products. Furthermore, ASIC is seeking feedback on key issues which include:

• The application of existing financial services licensing processes to digital asset businesses.
• The regulatory challenges related to wrapped tokens and stablecoins.
• The potential for regulatory relief for businesses transitioning to new regimes.

Furthermore, ASIC noted that it would consult on these updates until February 28, 2025. The regulator will publish a final version of INFO 225 in mid-2025 after considering the feedback received.

Moreover, it would also continue to use its regulatory tools to protect consumers and maintain market integrity within the digital asset space. These guidelines will also be applicable to some of the top crypto exchanges in Australia.

Crypto Industry Experts Slam the Move

Crypto industry experts stated that compliance will no longer be optional under the new regulatory rules and market players are likely to have a close look at it. There have also been growing concerns that ASIC’s draft guidance could leave crypto startups vulnerable, potentially driving an exodus of firms from Australia.

Crypto lawyer Joni Pirovich commented on LinkedIn that the updated guidance could make launching a crypto business in Australia “as costly as, or even more expensive than, launching offshore”. She added:

“From a timing perspective, Australian innovators that want to launch now will likely do so offshore. Those that are based here face a significant step up in compliance costs”.

Liam Hennessy, a partner at Clyde and Co law firm, also echoed similar thoughts on this. He said: “Obviously, the bigger businesses will be better able to withstand all of that regulation, all of that legal cost, compliance cost that is associated with it. Smaller businesses may struggle”.

However, he also appreciated the move towards greater regulatory clarity. Hennessy said: “It is a significant piece of regulatory guidance to the market. Anything which gives regulatory clarity is a good thing for the market.”

The Changing Digital Assets Regulation and Landscape

Australia’s digital assets landscape has been changing amid global developments and the emergence of crypto ETFs in the market. As part of the region’s improving clarity on digital asset regulation, asset manager Monochrome launched its Ethereum ETF (IETH) amid the rising demand growth in the local market. Crypto investment products have been also gaining traction amid changes in the global regulatory market and rising acceptance.

Looking at the regulatory development, crypto firms are also looking to expand in Australia. Circle has announced the expansion of its USDC stablecoin operations into Australia while collaborating with venture capitalist Mark Carnegie’s MHC Digital Group. The partnership aims to leverage the robust financial infrastructure of Australia enhancing the utility and accessibility of USDC in the region.